Abstract
AbstractThis paper analyses the horizontal cross‐border mergers under the framework of political economy in mixed markets. We explore the conditions under which a cross‐border merger between a partially privatized foreign public firm and a profit‐maximizing domestic firm occurs and is approved by the domestic government. We show that a welfare‐maximizing domestic government approves the merger if the share owned by the foreign government is sufficiently low and the merger is relatively efficient; a government only caring about political contributions always approves such a merger; we also consider the case where the government cares about both social welfare and political contributions.
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