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Domestic versus cross-border acquisitions: which impact on the target firms' performance?

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  • Olivier Bertrand
  • Habib Zitouna

Abstract

This article investigates the effects of horizontal acquisitions on the performance of target firms in the 1990s. Using French manufacturing firm-level data, we examine two main indicators of performance: the profit and the productive efficiency. We distinguish domestic from cross-border acquisitions. To evaluate the impact of take-overs, we implement appropriate difference-in-difference estimation techniques associated to a matching propensity score procedure. We find that Mergers & Acquisitions (M&A) do not increase the profit of French target firms, even on the long run. However, they clearly raise the productivity of target firms. These results suggest that firms probably redistribute efficiency gains at the upstream and/or downstream production stage. There is no evidence of an increase in market power. In addition, the consequences of domestic and cross-border M&A significantly differ. Efficiency gains are stronger for cross-border M&A. This conclusion is however true only for extra-European Union operations. The achievement in the European economic integration certainly explains the absence of difference between European and domestic acquisitions. Finally, our results cast some doubt on the frequent discrimination attitude towards foreign takeovers and the fears of their impact on firms' performance and the host country's welfare.

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File URL: http://www.tandfonline.com/doi/abs/10.1080/00036840600949397
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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 40 (2008)
Issue (Month): 17 ()
Pages: 2221-2238

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Handle: RePEc:taf:applec:v:40:y:2008:i:17:p:2221-2238

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Cited by:
  1. Baghdadi, Leila & Martinez-Zarzoso, Inmaculada & Zitouna, Habib, 2013. "Are RTA agreements with environmental provisions reducing emissions?," Journal of International Economics, Elsevier, vol. 90(2), pages 378-390.
  2. Karl-Markus Modén & Pehr-Johan Norbäck & Lars Persson, 2008. "Efficiency and Ownership Structure: The Case of Poland," The World Economy, Wiley Blackwell, vol. 31(3), pages 437-460, 03.
  3. Anca-Simona HROMEI, 2013. "Reasons For Mergers And Their Impact On Companies," CrossCultural Management Journal, Fundația Română pentru Inteligența Afacerii, Editorial Department, issue 27, pages 82-88, February.
  4. Kaitila, Ville & McQuinn, John & Siedschlag, Iulia & Zhang, Xiaoheng, 2013. "International Investment and Firm Performance: Empirical Evidence from Small Open Economies," ETLA Reports 6, The Research Institute of the Finnish Economy.
  5. Lehto, Eero, 2011. "Electricity prices in the Finnish retail market," Energy Policy, Elsevier, vol. 39(4), pages 2179-2192, April.
  6. Leila Baghdadi & Inmaculada Martínez-Zarzoso & Celestino Suárez-Burguet & Habib Zitouna, 2012. "Is the road to regional integration paved with pollution convergence?," Working Papers 2012/03, Economics Department, Universitat Jaume I, Castellón (Spain).
  7. Mano, Yukichi & Suzuki, Aya, 2013. "Industrial Development through Takeovers and Exits: the Case of the Cut Flower Exporters in Ethiopia," Discussion Papers 2013-05, Graduate School of Economics, Hitotsubashi University.
  8. John P. Weche Geluebcke, 2012. "Foreign and Domestic Takeovers in Germany: First Comparative Evidence on the Post-acquisition Target Performance using new Data," Working Paper Series in Economics 249, University of Lüneburg, Institute of Economics.
  9. Takechi, Kazutaka, 2013. "Understanding the productivity effect of M&A in Japan: An empirical analysis of the electronics industry from 1989 to 1998," Japan and the World Economy, Elsevier, vol. 25, pages 1-9.
  10. Walter Park & Ralph Sonenshine, 2012. "Impact of Horizontal Mergers on Research & Development and Patenting: Evidence from Merger Challenges in the U.S," Journal of Industry, Competition and Trade, Springer, vol. 12(1), pages 143-167, March.
  11. Schiffbauer, Marc & Siedschlag, Iulia & Ruane, Frances, 2009. "Do Foreign Mergers & Acquisitions Boost Firm Productivity?," Papers DYNREG47, Economic and Social Research Institute (ESRI).

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