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Foreign ownership and performance: evidence from a panel of Italian firms

Author

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  • Chiara Bentivogli

    (Bank of Italy)

  • Litterio Mirenda

    (Bank of Italy)

Abstract

The paper studies the impact of foreign ownership on a firm’s economic performance. We use a unique panel dataset to test the foreign ownership premium by comparing our sample of firms based in Italy and owned by a foreign subject with a sample of purely domestic firms that, in order to have a proper counterfactual, were selected using propensity score matching. Our difference-in-differences results show the existence of a premium for the size, profitability and financial soundness of the foreign-owned companies. The premium increases with time, is concentrated in the service sector, and disappears if the foreign investor is based in a fiscal haven.

Suggested Citation

  • Chiara Bentivogli & Litterio Mirenda, 2016. "Foreign ownership and performance: evidence from a panel of Italian firms," Temi di discussione (Economic working papers) 1085, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:wptemi:td_1085_16
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    10. John P. Weche Gelübcke, 2013. "Foreign and Domestic Takeovers in Germany: Cherry-picking and Lemon-grabbing," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot, Berlin, vol. 59(4), pages 275-294.
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    12. Benfratello, Luigi & Sembenelli, Alessandro, 2006. "Foreign ownership and productivity: Is the direction of causality so obvious?," International Journal of Industrial Organization, Elsevier, vol. 24(4), pages 733-751, July.
    13. Bruce A. Blonigen & Lionel Fontagné & Nicholas Sly & Farid Toubal, 2012. "Cherries for Sale: Export Networks and the Incidence of Cross-Border M&A," NBER Working Papers 18414, National Bureau of Economic Research, Inc.
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    Cited by:

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    2. Edmund Mallinguh & Christopher Wasike & Zeman Zoltan, 2020. "The Business Sector, Firm Age, and Performance: The Mediating Role of Foreign Ownership and Financial Leverage," IJFS, MDPI, vol. 8(4), pages 1-16, December.
    3. Lorenzo Bencivelli & Beniamino Pisicoli, 2022. "Foreign investors and target firms’ financial structure," International Economics, CEPII research center, issue 169, pages 230-251.
    4. Lucian Belascu & Alexandra Horobet & Georgiana Vrinceanu & Consuela Popescu, 2021. "Performance Dissimilarities in European Union Manufacturing: The Effect of Ownership and Technological Intensity," Sustainability, MDPI, vol. 13(18), pages 1-19, September.
    5. Alexandra Horobet & Lucian Belascu & Ștefania Cristina Curea & Alma Pentescu, 2019. "Ownership Concentration and Performance Recovery Patterns in the European Union," Sustainability, MDPI, vol. 11(4), pages 1-31, February.
    6. Imran Khan & Anup Kumar Saha & Yousuf Kamal & Md. Shafiqul Islam, 2025. "Do ownership structure and board composition matter in firm performance? Regulatory influence in developing economy," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 22(1), pages 263-283, March.
    7. Lorenzo Bencivelli & Beniamino Pisicoli, 2021. "Foreign investors and target firms’ financial structure: cavalry or locusts?," Temi di discussione (Economic working papers) 1327, Bank of Italy, Economic Research and International Relations Area.
    8. Mina Baliamoune‐Lutz & Mohamed A. K. Basuony & Stefan H. H. Lutz & Ehab K. A. Mohamed, 2024. "International ownership and SMEs in Middle Eastern and African economies," African Development Review, African Development Bank, vol. 36(2), pages 279-291, June.
    9. S. Selsah Pasal & Arslan Chaudhary, . "Assessing the impact of foreign ownership on firm performance by size: evidence from firms in developed and developing countries," UNCTAD Transnational Corporations Journal, United Nations Conference on Trade and Development.
    10. Campagnolo, Diego & Vincenti, Giampiero, 2022. "Cross-border M&As: The impact of cultural friction and CEO change on the performance of acquired companies," Journal of International Management, Elsevier, vol. 28(4).
    11. Marek Csabay & Zuzana Vincúrová & Milan Stoch & Beáta Stehlíková, 2021. "Enterprise ownership patterns in the least developed districts of Slovakia," Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of Economic Research, vol. 16(4), pages 807-838, December.
    12. Svilena Mihaylova, 2023. "Foreign Affiliates versus Domestic Firms in the Information and Communication Services Sector in Central and Eastern Europe," Bulgarian Economic Papers bep-2023-04, Faculty of Economics and Business Administration, Sofia University St Kliment Ohridski - Bulgaria // Center for Economic Theories and Policies at Sofia University St Kliment Ohridski, revised Mar 2023.
    13. Ali Shaddady & Faisal Alnori, 2020. "Do Ownership Structure, Political Connections and Executive Compensation Have Multifaceted Effects on Firm Performance? An Alternative Approach," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 12(10), pages 1-22, October.
    14. Xiaojian Hu & Gang Yao & Taiyun Zhou, 2022. "Does ownership structure affect the optimal capital structure? A PSTR model for China," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(2), pages 2458-2480, April.
    15. Aziz Jaafar & Lynn Hodgkinson & Mao-Feng Kao, 2019. "Ownership Structure, Board of Directors and Firm Performance: Evidence from Taiwan," Working Papers 19011, Bangor Business School, Prifysgol Bangor University (Cymru / Wales).
    16. Gaygysyz Ashyrov & Nicolas Gavoille & Kjetil Haukås & Rasmus Bøgh Holmen & Jaan Masso, 2024. "Foreign Ownership And Productivity: A Comparative Study Of Estonia, Latvia And Norway," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 148, Faculty of Economics and Business Administration, University of Tartu (Estonia).
    17. Beccari, Gabriele & Pisicoli, Beniamino & Vocalelli, Giorgio, 2023. "Barbarians at the gate? FDI and target firms’ management quality," MPRA Paper 117242, University Library of Munich, Germany.
    18. Catão, Luis A. V. & de Faria, Pedro & Martins, António & Portela, Miguel, 2023. "Globalization and Firm Performance," IZA Discussion Papers 15903, Institute of Labor Economics (IZA).
    19. Paul Wabiga & Neil Rankin, 2023. "Foreign acquisition and firm performance in sub‐Saharan Africa: Empirical evidence from Ghana," South African Journal of Economics, Economic Society of South Africa, vol. 91(2), pages 242-269, June.

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    More about this item

    Keywords

    multinational enterprise; ownership; foreign direct investment; firm performance;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F61 - International Economics - - Economic Impacts of Globalization - - - Microeconomic Impacts

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