Partial ownership and cross-border mergers
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2014
Authors
Stähler, F.
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Journal of Economics, 2014; 111(3):209-237
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Frank Stähler
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Abstract
Partial ownership can be used as a screening device by a foreign firm which wants to merge with a local firm whose productivity is private information. As partial ownership is confined to sharing future merger profits, it cannot achieve complete separation in all cases but improves expected merger gains also in an equilibrium which is not fully separating. Without partial ownership, the foreign firm potentially discriminates against high productivities. In a pooling equilibrium with partial ownership, however, it will potentially discriminate against intermediate productivities.
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© Springer-Verlag Wien 2012