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Foreign Ownership and Firm Performance: Emerging-Market Acquisitions in the United States

  • Anusha Chari
  • Wenjie Chen
  • Kathryn M.E. Dominguez

This paper examines the recent upsurge in foreign acquisitions of U.S. firms, specifically focusing on acquisitions made by firms located in emerging markets. Neoclassical theory predicts that, on net, capital should flow from countries that are capital-abundant to countries that are capital-scarce. Yet increasingly emerging market firms are acquiring assets in developed countries. Using transaction-specific acquisition data and firm-level accounting data we evaluate the post-acquisition 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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File URL: http://www.nber.org/papers/w14786.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14786.

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Date of creation: Mar 2009
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Publication status: published as Anusha Chari & Wenjie Chen & Kathryn M E Dominguez, 2012. "Foreign Ownership and Firm Performance: Emerging Market Acquisitions in the United States," IMF Economic Review, Palgrave Macmillan, vol. 60(1), pages 1-42, April.
Handle: RePEc:nbr:nberwo:14786
Note: IFM
Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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