Cross-border Mergers and Acquisitions: the Role of Regional Trade Agreements

In recent years, many “mega-regional” trade agreements have been signed, such as the United States-led Trans-Pacific Partnership (TPP) and the China-led Regional Comprehensive Economic Partnership (RCEP). No matter what industry that companies are in, due to the economies of scale, rapidly enter a foreign market or many other reasons, so that cross-border mergers and acquisitions. However, the existing literature has focused little on the implications of regional trade agreements on cross-border mergers and acquisitions. This paper contributes to the role of regional trade agreements and their impact on cross-border mergers and acquisitions. I use a sample of 23,600 cross-border mergers between 2008 and 2014 to conduct the multiple regression analysis. The empirical results show that the difference of regional trade agreements between acquirer country and target country does have a statistically significant impact on cross-border mergers and acquisitions The managerial implication of the result is that, when firms decide to purchase another firm abroad, a good choice of target firm is the one which is in a country with more numbers of regional trade agreements. It also implies that even if the acquirer is in a country, of which the government has not signed many regional trade agreements with other countries, could benefit from the regional trade agreements through this decision.