Modeling the Bargaining Game Between Multinational Firms and Britain's Office of Fair Trading: An Exploratory Analysis
Kryda, Georgine Marie
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https://hdl.handle.net/2142/77469
Description
Title
Modeling the Bargaining Game Between Multinational Firms and Britain's Office of Fair Trading: An Exploratory Analysis
Author(s)
Kryda, Georgine Marie
Issue Date
1997
Doctoral Committee Chair(s)
Hennart, Jean-Francois
Roehl, Thomas
Department of Study
Business Administration
Discipline
Business Administration
Degree Granting Institution
University of Illinois at Urbana-Champaign
Degree Name
Ph.D.
Degree Level
Dissertation
Keyword(s)
Business Administration, Management
Economics, Commerce-Business
Language
eng
Abstract
This non-normative investigation looks at how expectations regarding consistency, predictability, and transparency are formed by corporate managers and government officials within a highly discretionary system of regulation. Interactions between companies (foreign and domestic) and Britain's Office of Fair Trading (OFT) are studied in order to assess the impact of international relations, institutional features, and business strategy on merger review in the United Kingdom.
Regulatory systems are conduits whereby all companies, foreign and domestic, express accountability to the host public's interest and the host government communicates its economic policy to the business community by allowing or disallowing certain activities. Binomial logistic regression models, drawing from a sample of 1,910 mergers under UK jurisdiction between 1984-1995, suggest that the individual Secretary of State for Trade and Industry is a principal, but not the sole, influence on the government's decision to take action. Other, more complex factors (e.g., regional assistance to the target's area, access to share and loan capital in the acquiring firm's home country), increase the odds of a merger requiring more detailed investigation by the Monopolies and Mergers Commission (MMC) versus receiving explicit clearance from the OFT. The foreign registration per se of a multinational enterprise in the role of acquirer does not influence the government's decision to review a merger.
Few cases actually reach the MMC. The expense and intrusiveness of inquiries for both the target firms and the government lead to expectations that bargaining is preferred. Case histories of OFT and MMC decisions are reconstructed in order to determine why a negotiated settlement was or was not reached early on. These case histories of specific mergers illustrate how either corporate or agency strategy can influence the decision to pursue a case through the entire regulatory framework.
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