Firm Performance after Ownership Change: A Matching Estimator Approach
AbstractBased on balance sheet data of a sample of Austrian manufacturing firms, this paper examines the causal effect of foreign takeovers on the performance (productivity and profitability) and the growth rate of Austrian target firms. Thereby, we consider two hypotheses that an acquired underperforming firm (“lemon”) improves its performance post takeover versus the “cherry picking” (overperformers) view. The latter suggests endogeneity of takeover decisions. Consequently we follow a difference-in-difference approach with endogenous selection using the matching estimator technique. The probit selection model suggests that in general, the risk of being taken over is very low, and that the possibility to improve the market power (indicated by below average profitability) and intangible assets (indicated by above average productivity and export orientation) explain the takeover decision. Our results suggest that in general the effects are small, but post-takeover growth of profitability tends to be significantly higher for “lemons” than for “cherries”. Employment and productivity growth are not significantly affected, independent of the pre-takeover performance and the matching estimator used. Lemons reduce the productivity gap vis-à-vis cherries 4 years after the takeover by 13 percentage points.
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Bibliographic InfoArticle provided by Duncker & Humblot, Berlin in its journal Applied Economics Quarterly.
Volume (Year): 52 (2006)
Issue (Month): 1 ()
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Web page: http://www.duncker-humblot.de
Find related papers by JEL classification:
- C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
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