Economic Nationalism in Mergers and Acquisitions

This paper studies the government reaction to large corporate merger attempts in the European Union during 1997-2006 using hand-collected data. It documents widespread economic nationalism in which the government reaction depends on the nationality of the acquiring company. The nationalism takes place both as resistance to foreign acquirers and as support for domestic ones. This nationalism has both direct and indirect economic impact. The paper shows that government intervention is very effective in preventing foreign bidders from completing the merger and in helping domestic bidders succeed. The paper also demonstrates that nationalistic government reactions deter, indirectly, foreign companies from bidding for other companies in a country in the future.