Exchange rates and cross-border mergers and acquisitions. Does the relationship still apply in today’s integrated markets?

Table of Contents

1 INTRODUCTION

2 SWITZERLAND

2.1 R&D-INTENSIVE ECONOMY

2.2 EXPORT LEADERS

2.3 STRONG CURRENCY

3 LITERATURE REVIEW

3.1 THE TRADITIONAL VIEW

3.2 THE CONTEMPORARY VIEWS

3.2.1 ASYMMETRIES AND IMPERFECTIONS IN CAPITAL MARKETS

3.2.2 COSTS AND IMPERFECTIONS IN THE FACTOR MARKETS

3.2.3 COSTS AND IMPERFECTIONS IN THE GOOD MARKETS

3.3 RESEARCH HYPOTHESES

4 DATA AND METHODOLOGY

4.1 SWISS ACQUISITION FDI IN THE US AND UK – AN OVERVIEW

4.2 SAMPLE DESCRIPTION

4.2.1 DEPENDENT VARIABLE

4.2.2 INDEPENDENT VARIABLES

4.2.3 SUMMARY OF SAMPLES

4.3 METHODOLOGY

4.3.1 REGRESSION EQUATIONS

4.3.2 POISSON MODEL

4.3.3 NEGATIVE BINOMINAL MODEL

4.3.4 RANDOM EFFECT NEGATIVE BINOMINAL MODEL

5 RESULTS

5.1 DESCRIPTIVE STATISTICS

5.2 EMPIRICAL RESULTS

5.2.1 SWISS ACQUISITION FDI IN THE US

5.2.2 SWISS ACQUISITION FDI IN THE UK

5.2.3 CONTROL VARIABLES

5.3 SUMMARY OF FINDINGS

5.4 LIMITATIONS AND RECOMMENDATIONS

6 CONCLUSION

Research Objectives & Core Themes

This dissertation examines whether the historical relationship between real exchange rates and cross-border merger and acquisition (M&A) activity persists in today's integrated global markets, specifically focusing on Swiss acquisitions in the US and the UK between 1996 and 2013. The primary research goal is to test the validity of Blonigen's (1997) firm-specific asset acquisition theory within integrated economic environments.

• The link between real exchange rates and foreign direct investment (FDI).
• Impact of R&D-intensive industries on cross-border acquisition frequency.
• Market integration vs. market segmentation in explaining M&A determinants.
• Empirical evaluation using count regression models (Poisson, Negative Binomial).
• Comparison of Swiss-US and Swiss-UK cross-border acquisition dynamics.

Excerpt from the Book

Summary of Chapters

1 INTRODUCTION: Introduces the research context of cross-border M&A, basic definitions of FDI, and outlines the theoretical debates regarding the link between exchange rates and foreign acquisitions.

2 SWITZERLAND: Discusses the unique characteristics of the Swiss economy, focusing on its R&D-intensive nature, export leadership, and the strength of the Swiss Franc as drivers for international M&A.

3 LITERATURE REVIEW: Analyzes the evolution of academic thought on FDI, transitioning from the traditional purchasing power parity view to contemporary theories like imperfect capital and product markets.

4 DATA AND METHODOLOGY: Details the sample selection criteria for Swiss-US and Swiss-UK deals, defines the dependent and independent variables, and explains the application of count regression models.

5 RESULTS: Presents the empirical findings from the regression analysis, evaluates the research hypotheses, and discusses the robustness checks performed on the data samples.

6 CONCLUSION: Synthesizes the empirical findings, concludes that the exchange rate link does not hold for integrated markets, and highlights limitations for future research.

Keywords

Foreign Direct Investment (FDI), Cross-border M&A, Exchange Rates, R&D-intensive industries, Market Integration, Switzerland, United States, United Kingdom, Poisson Model, Negative Binomial, Firm-specific assets, Purchasing Power Parity, Wealth Effect, Capital Markets, Asset Acquisition.

Frequently Asked Questions

What is the fundamental focus of this dissertation?

The paper examines whether the relationship between exchange rate fluctuations and cross-border merger and acquisition (M&A) activity, originally identified by authors like Blonigen, still holds true in contemporary, highly integrated international markets.

What are the primary thematic areas covered?

The research covers the economic theory of FDI, the impact of R&D-intensive manufacturing on acquisition frequency, the role of real exchange rates, and the methodology of count regression models.

What is the central research question?

The central question is: Does the relationship between real exchange rates and acquisition FDI, specifically in R&D-intensive industries, still apply in today’s integrated markets as it did in historically segmented markets?

Which scientific methods are employed?

The study utilizes industry-specific count regression models, specifically the Poisson model, Negative Binomial (NB) model, and Random Effects Negative Binomial (RENB) model to analyze panel data.

What does the main body address?

The main body systematically reviews existing literature, defines the data samples and variable construction, applies econometric models to test hypotheses, and presents and discusses the resulting findings.

Which keywords characterize this work?

Key terms include Foreign Direct Investment, Cross-border M&A, Exchange Rates, R&D-intensive, Market Integration, and Firm-specific assets.

Why was Switzerland chosen as the research platform?

Switzerland was selected due to its stable economy, unique manufacturing sector, and exceptionally high level of R&D activity, providing an ideal base for testing the firm-specific asset acquisition theory.

What was the key finding regarding Blonigen’s theory?

The study found no evidence supporting Blonigen’s firm-specific asset acquisition theory for the country pairs analyzed, concluding that the relationship does not hold for integrated markets.

How does this study handle data limitations?

The author addresses data constraints, such as the unavailability of certain firm counts in the UK, by adapting the regression models and focusing on the consistency of findings across the Swiss-US and Swiss-UK samples.