Determinants of Financial M&A Activities among East Asia
Date Issued
2008
Date
2008
Author(s)
Lin, Yu-Tzu
Abstract
Since the early 1990s East Asia has reduced its financial restrictions on capital account transactions and barriers to entry by foreign direct investment (FDI), resulting in a rapid increase in the region’s international capital mobility. High levels of economic growth across the region have attracted investment, boosting demand for the limited number of quality assets and increasing cross-border merger and acquisition (M&A) activities, which have driven the flow of FDI. This research studies East Asia’s financial integration analyzing by using a gravity model for the period 1991-2007. Contrary to previous studies, the results showed that the cross-border financial M&A activities between countries in East Asia are more active than those between countries inside and outside of East Asia (e.g., the US and Hong Kong). The paper uses a gravity model, along with some macroeconomic variables, to determine influences on the financial cross-border M&A activities in East Asia. The financial cross-border M&A activity is positively correlated with GDP, GDP per capita, language, stock market capitalization, and trade and negatively correlated with distance and inflation. This suggests that bidder countries that are more likely to international tend to be from larger and more open economies, with high level of income, better macroeconomic policies and a common culture, language.
Subjects
Cross-Border Merge and Acquisition
East Asia
Gravity Model
Type
thesis
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