THREE ESSAYS ON CROSS-BORDER MERGERS AND ACQUISITIONS

This dissertation consists of three essays on cross-border mergers and acquisitions (M&As). The first essay studies horizontal and vertical investments between Organization for Economic Cooperation and Development (OECD) countries, while the second essay examines how investment patterns vary by country development. The third essay estimates the effect of merger policy reform on cross-border M&A activity in Europe. The first essay tests how well theories of horizontal and vertical foreign direct investment (FDI) explain observed patterns of cross-border M&As in OECD countries. Horizontal investment occurs when multinational firms produce in foreign countries to serve the foreign market, whereas vertical investment occurs when multinational firms source intermediate goods from foreign affiliates for final assembly and sales at home. The former is often used to displace exports when transport costs exceed local production costs, while the latter is often driven by cross-country factor price differentials. Little support is found for the traditional explanations of FDI as results indicate horizontal and vertical investments look much more similar than previously believed. The second essay challenges long-standing beliefs that the majority of FDI within the developed world is horizontal, whereas investments into developing nations are predominantly vertical. Developed-developed FDI is largely cross-border M&As and FDI into developing nations typically consists of greenfield investments. However, cross-border M&As are becoming more popular in developing countries and, contrary to previous beliefs, the proportion of horizontal and vertical investment is independent of country development. Results suggest trade costs have a stronger effect on developing countries, while no clear support is found for the idea that factor endowment drives vertical investments in developing nations. The third essay examines how reforms to European Commission Merger Regulation (ECMR) in 2004 affected cross-border M&A activity in Europe. The ECMR outlines competition rules and empowers the European Commission (EC) to block anti-competitive mergers adversely affecting the European market. Details of the reform suggest the law was expanded to cover more mergers, which is expected to have a non-positive effect on merger activity. Difference-in-differences results suggest the reform had no significant effect on cross-border merger activity in countries within the EC’s jurisdiction

The Replacement of the Brent Spence Bridge: Tolls, Commuting Patterns and Economic Activity in Northern Kentucky

Executive Summary: In this report, we investigate the impact of proposed tolls levied on users of the replacement for the Brent Spence Bridge, including impacts on commuting patterns and overall economic activity in Northern Kentucky. Overall, consistent with economic literature, the economic impact of the improved bridge will be positive and the toll, while slightly mitigating that impact, is likely to have only small effects on commuting patterns, trucking and retail and food service industries. We estimate that the net impact of the new bridge and the toll under our estimated likely scenarios would reduce commuter traffic by less than 2%, and possibly increase traffic by 1%. We estimate that the net impact of the new bridge and the toll under our likely scenarios would decrease trucking by less than 3% for trips made over the bridge: only a portion of overall trucking in the region. Our results suggest that while there may be some over-river shopping in Northern Kentucky, there are also consumers in Northern Kentucky shopping in Cincinnati: while the toll may reduce trips, it is unlikely to have an impact on retail or accommodation and food service in the region. We were also asked to investigate the impact of the Davis-Bacon act on the overall cost of the bridge. We find that the construction costs may be 10 to 15% higher due to Davis-Bacon wage requirements

Export Strength and Opportunities for Kentucky Industries

Executive Summary: This project\u27s primary goal is to quantify export strengths and opportunities in Kentucky industries. We measure export strength as the relative dollar value of exports per worker in four digit industries using U.S. dollar value of exports per worker as the base. Tables were prepared for total exports and a selection of 50 countries representing 98.5% of Kentucky exports and 93.2% of U.S. exports. In addition to the export index, a measure of industry strength based upon labor and comparisons to regional competitor states is provided. Industries with a low index value, either overall or for specific countries, present opportunities for exports as they reflect low exports relative to the rest of the country and controlling for industry strength and overall U.S. exports of that industry to that country. Industries with a low industry strength index may be opportunities for Kentucky Economic Development Cabinet intervention. These smaller industries may lack resources necessary to establish trading agreements. Broad intervention on the part of the Cabinet may overcome this lack of resources and lead to higher exports and industry growth. Some focus on the dollar value of exports per worker is warranted and these data are provided for the U.S. as a whole. These industries may present opportunities for high dollar value exports, which can lead to higher wages for workers