Trends and Determinants in the Japanese Cross-Border M&As

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This paper provides an overview of the recent trends in the Japanese cross-border M&A activity in 1988-2004 and investigates the factors influencing them. We develop classifications of theoretical foundations and factors of M&A activity and their application for the Japanese case. The article examines two categories of the Japanese M&As - transactions with Japanese companies as a target (sales) and transactions with Japanese companies as an acquirer (purchases). In the Japanese cross-border M&A sales in order to determine factors of changes we look into industrial and institutional structures of M&A transactions. The findings show that beyond the changes in macroeconomic conditions, the recent trends of cross-border M&A sales in Japan were determined mainly by the changes in legislative and corporate environment. For Japanese outward M&A flows we test the standard gravity model. The results show that the volume of the Japanese cross-border M&A purchases is significantly larger in countries with larger and developed markets, a higher degree of investor's protection and a higher liquidity of capital markets. The main factor affecting the location of Japanese M&A purchase in developed markets is the bilateral trade flow between Japan and a target country. (JEL F21, G34)