Diplomatic relations and cross-border investments in the European Union
JRC Working Papers in Economics and Finance, 2021/02
This study investigates the extent to which diplomatic relations affected merger and acquisition (M&A) activities in the European Union during the years 2001–2019. Implementing a gravity model, we find a positive relationship between diplomatic distance and M&A activities meaning that a worsening in diplomatic relations fosters inward M&As in Europe. The finding suggests that cross-border acquisitions to Europe could be a way for the investing firm to mitigate weak diplomatic relations’ related issues, such as access to host markets’ information and technology. It is confirmed especially when foreign investors target high-tech firms, are private (rather than state-owned) enterprises and buy larger shares of the target companies.
DAMIOLI Giacomo;
GREGORI Wildmer;
2021-04-26
Publications Office of the European Union
JRC124250
978-92-76-41950-1 (online),
2467-2203 (online),
OP KJ-AE-21-004-EN-N (online),
https://publications.jrc.ec.europa.eu/repository/handle/JRC124250,
10.2760/676500 (online),
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