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Access to finance, foreign ownership and foreign takeovers in Germany

Author

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  • Joachim Wagner
  • John P. Weche Gelübcke

Abstract

With this article we present the first microeconometric analysis of the impact of a foreign acquisition on the target firm's access to finance. By using a large database of German firms, we furthermore investigate for the first time the link between foreign ownership and access to finance in Germany, one of the world's leading target countries for FDI. We use newly available comprehensive panel data that we constructed from information collected by the German statistical offices and from credit rating scores supplied by the leading German credit rating agency. We find foreign-owned firms in German manufacturing on average to show slightly more financing restrictions than domestically owned enterprises, but this very small difference diminishes once unobserved heterogeneity is taken into account. We further demonstrate that one reason for this finding is the preference of foreign investors for targets with relatively low credit-worthiness. Although the likelihood of a foreign acquisition appears to be correlated with credit rating, there is no impact of foreign takeovers on the credit constraints of the target firms ex post and therefore no support for the hypothesis that foreign takeovers ease financial frictions.

Suggested Citation

  • Joachim Wagner & John P. Weche Gelübcke, 2015. "Access to finance, foreign ownership and foreign takeovers in Germany," Applied Economics, Taylor & Francis Journals, vol. 47(29), pages 3092-3112, June.
    • Handle: RePEc:taf:applec:v:47:y:2015:i:29:p:3092-3112
    DOI: 10.1080/00036846.2015.1011323
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    Cited by:

    1. Görg, Holger & Lehr, Jakob, 2024. "Short and medium-term effects of foreign acquisitions on manufacturing firms: Evidence from Germany," Open Access Publications from Kiel Institute for the World Economy 302104, Kiel Institute for the World Economy (IfW Kiel).
    2. Görg, Holger & Lehr, Jakob, 2024. "Short and medium-term effects of foreign acquisitions on manufacturing firms: Evidence from Germany," Economics Letters, Elsevier, vol. 241(C).
    3. Muhammad Arif & Mudassar Hasan & Ahmed Shafique Joyo & Christopher Gan & Sazali Abidin, 2020. "Formal Finance Usage and Innovative SMEs: Evidence from ASEAN Countries," JRFM, MDPI, vol. 13(10), pages 1-19, September.
    4. René Söllner & Sandra Jung, 2017. "The impact of foreign trade and ownership on enterprise exits: new insights through micro data linking," AStA Wirtschafts- und Sozialstatistisches Archiv, Springer;Deutsche Statistische Gesellschaft - German Statistical Society, vol. 11(1), pages 8-32, April.

    More about this item

    JEL classification:

    • 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
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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