Cross-border acquisitions and optimal government policy

Bose, Gautam and Dasgupta, Sudipto and Ghosh, Arghya (2011) Cross-border acquisitions and optimal government policy. Economic Record, 87 (278). pp. 427-437. ISSN 0013-0249

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Abstract

This article analyses the optimality of policy specifications used to regulate the acquisition and operation of local firms by multinational enterprises. We emphasise the consequence of such regulations on the price of the domestic firm in the market for corporate control. We show that it is optimal to impose ceilings on foreign ownership of domestic firms when the government's objective is to maximise domestic shareholder profits, or a sum of those profits and tax revenues. While the optimal ceiling is high enough for the multinational enterprise (MNE) to gain control of the domestic firm, it nevertheless influences the price that the MNE must pay for the domestic firm's shares to the advantage of the domestic shareholders. Surprisingly, stringent restrictions on transfer pricing turn out to be strictly suboptimal in this context.

Item Type: Journal Article
Journal or Publication Title: Economic Record
Uncontrolled Keywords: /dk/atira/pure/subjectarea/asjc/2000/2002
Subjects:
Departments: Lancaster University Management School > Accounting & Finance
ID Code: 75916
Deposited By: ep_importer_pure
Deposited On: 21 Oct 2015 05:02
Refereed?: Yes
Published?: Published
Last Modified: 01 Jan 2020 09:24
URI: https://eprints.lancs.ac.uk/id/eprint/75916

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