Foreign Ownership and Corporate Restructuring: Direct Investment by Emerging-Market Firms in the United States
AbstractThis paper examines the recent upsurge in foreign direct investment by emerging-market firms into the United States. Traditionally, direct investment flowed from developed to developing countries, bringing with it superior technology, organizational capital, and access to international capital markets, yet increasingly there is a trend towards Òcapital flowing uphillÓ with emerging market investors acquiring a broad range of assets in developed countries. Using transaction-specific information and firm-level accounting data we evaluate the operating performance of publicly traded U.S. firms that have been acquired by firms from emerging markets over the period 1980-2007. Our empirical methodology uses a difference-in-differences approach combined with propensity score matching to create an appropriate control group of non-acquired firms. The results suggest that emerging country acquirers tend to choose U.S. targets that are larger in size (measured as sales, total assets and employment), relative to matched non-acquired U.S. firms before the acquisition year. In the years following the acquisition, sales and employment decline while profitability rises, suggesting significant restructuring of the target firms.
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Bibliographic InfoPaper provided by Research Seminar in International Economics, University of Michigan in its series Working Papers with number 601.
Length: 56 pages
Date of creation: Nov 2009
Date of revision:
foreign direct investment; capital flows; emerging markets; acquisitions; firm performance;
Find related papers by JEL classification:
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
- F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-05-29 (All new papers)
- NEP-BEC-2010-05-29 (Business Economics)
- NEP-IFN-2010-05-29 (International Finance)
- NEP-INT-2010-05-29 (International Trade)
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- Chen, Wenjie, 2011. "The effect of investor origin on firm performance: Domestic and foreign direct investment in the United States," Journal of International Economics, Elsevier, vol. 83(2), pages 219-228, March.
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