Date Added: Apr 2010
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 prefers the target companies remain domestically owned rather than foreign-owned. This preference for natives against foreigners takes place both as resistance to foreign acquirers and as support for domestic ones. It is also stronger at times and places with strong nationalistic sentiments, as proxied by the vote share of extreme right parties, which have made such preferences against foreigners their main policy in Europe. This nationalism has both direct and indirect economic impact: Government interventions are very effective in preventing foreign bidders from completing the merger and in helping domestic bidders succeed.