Undergraduate Honors Theses

Thesis Defended

Spring 2018

Document Type

Thesis

Type of Thesis

Departmental Honors

Department

Economics

First Advisor

Keith Maskus

Abstract

This study examines the effects of tariff barriers on cross-border Mergers and Acquisition (M&A) investment and shows how tariffs impact M&A deal value. Since the 1990s, we saw a decline in tariff rates for most nations coinciding with a sharp rise in cross-border M&A. The rise in cross-border M&A has significant implications on various issues from antitrust to foreign direct investment. To analyze the effect of tariff barriers, I use a panel dataset primarily obtained from Bloomberg and UNCTAD. I employ a gravity model to allow for distance and macroeconomic effects along with a poisson distribution based on the counting nature of the dataset. Based on the data given, there is a statistically significant positive correlation between M&A activity and tariff rates for both acquirer and target countries, indicating that a firms motive for cross-border M&A is mainly a market-entry strategy

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