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Foreign and Domestic Takeovers in Germany: Cherry-picking and Lemon-grabbing

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  • John P. Weche Geluebcke

    ()
    (Leuphana University Lueneburg, Institute of Economics, Germany)

Abstract

This study focuses on ex ante performance of domestic and foreign takeover targets in Germany, one of the most important FDI infl ow destinations worldwide. Using a new database from German offcial statistics, unconditional comparisons as well as binary response model estimations of takeover probabilities were performed for the manufacturing and service sector separately. The results showed a diametrically opposing impact of productivity and profitability on the takeover likelihood. This offers a conciliation of two supposedly opponent hypotheses, known as 'cherry-picking' and 'lemon-grabbing'. The results advocate assumptions of asset-exploiting and information asymmetries in favor of domestic investors but differ only marginally between foreign and domestic targets.

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Bibliographic Info

Paper provided by University of Lüneburg, Institute of Economics in its series Working Paper Series in Economics with number 240.

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Length: 33 pages
Date of creation: Apr 2012
Date of revision:
Handle: RePEc:lue:wpaper:240

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Web page: http://leuphana.de/institute/ivwl.html

Related research

Keywords: Foreign ownership; Germany; acquisition; firm performance; services; inward FDI; multinational firms; productivity;

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References

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  1. John P. Weche Geluebcke, 2011. "Ownership Patterns and Enterprise Groups in German Structural Business Statistics," Working Paper Series in Economics 212, University of Lüneburg, Institute of Economics.
  2. Kristiina Huttunen, 2007. "The Effect of Foreign Acquisition on Employment and Wages: Evidence from Finnish Establishments," The Review of Economics and Statistics, MIT Press, vol. 89(3), pages 497-509, August.
  3. Jäckle, Robert, 2006. "Going multinational: What are the effects on home market performance?," Discussion Paper Series 1: Economic Studies 2006,03, Deutsche Bundesbank, Research Centre.
  4. Patrik Karpaty, 2007. "Productivity Effects of Foreign Acquisitions in Swedish Manufacturing: The FDI Productivity Issue Revisited," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 14(2), pages 241-260.
  5. Ragnhild Balsvik & Stefanie A. Haller, 2010. "Picking "Lemons" or Picking "Cherries"? Domestic and Foreign Acquisitions in Norwegian Manufacturing," Scandinavian Journal of Economics, Wiley Blackwell, vol. 112(2), pages 361-387, 06.
  6. John H Dunning, 1988. "The Eclectic Paradigm of International Production: A Restatement and Some Possible Extensions," Journal of International Business Studies, Palgrave Macmillan, vol. 19(1), pages 1-31, March.
  7. Christian Bellak, 2004. "How Domestic and Foreign Firms Differ and Why Does it Matter?," Journal of Economic Surveys, Wiley Blackwell, vol. 18(4), pages 483-514, 09.
  8. Rajneesh Narula & Antonello Zanfei, 2003. "Globalisation of Innovation The Role of Multinational Enterprises," DRUID Working Papers 03-15, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
  9. Joachim Wagner, 2010. "Estimated Capital Stock Values for German Manufacturing Enterprises Covered by the Cost Structure Surveys," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 130(3), pages 403-408.
  10. Christian Bellak & Michael Pfaffermayr & Michael Wild, 2006. "Firm Performance after Ownership Change: A Matching Estimator Approach," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot, Berlin, vol. 52(1), pages 29-54.
  11. Robert H. McGuckin & Sang V. Nguyen, 1995. "On Productivity and Plant Ownership Change: New Evidence from the Longitudinal Research Database," RAND Journal of Economics, The RAND Corporation, vol. 26(2), pages 257-276, Summer.
  12. Harald Oberhofer & Matthias Stöckl & Hannes Winner, 2012. "The Wage Premium of Globalisation: Evidence from European Mergers and Acquisitions," WIFO Working Papers 416, WIFO.
  13. Christian Arndt & Anselm Mattes, 2010. "Cross-Border Mergers and Acquisitions of Multinational Firms. New Firm-Level Evidence," IAW Discussion Papers 62, Institut für Angewandte Wirtschaftsforschung (IAW).
  14. Alexander Vogel, 2009. "The German Business Services Statistics Panel 2003 to 2007," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 129(3), pages 515-522.
  15. Michael Fritsch & Bernd Görzig & Ottmar Hennchen & Andreas Stephan, 2004. "European Data Watch: Cost Structure Surveys for Germany," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 124(4), pages 557-566.
  16. Anselm Mattes, 2010. "International M&A: Evidence on Effects of Foreign Takeovers," IAW Discussion Papers 60, Institut für Angewandte Wirtschaftsforschung (IAW).
  17. Frank R. Lichtenberg & Donald Siegel, 1987. "Productivity and Changes in Ownership of Manufactoring Plants," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 18(3), pages 643-684.
  18. Bandick, Roger, 2010. "Foreign Acquisition, Wages and Productivity," Working Papers 10-21, University of Aarhus, Aarhus School of Business, Department of Economics.
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Cited by:
  1. 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.

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