Do Foreign Acquisitions Boost Performance of Target Firms in China？
LV Ruosi, LIU Qing, HUANG Can, HU Haiyan, LU Jinyong
School of Public Administration/School of International Trade and Economics, University of International Business and Economics;School of Economics, Capital University of Economics and Business;School of Public Finance and Taxation, Zhongnan University of Economics and Law
Abstract:
In this paper, we investigate the impact of foreign acquisitions on performance of target firms in China using a unique dataset. We use OLS model as baseline, and also apply propensity score matching (PSM) combined with difference-in-differences (DID) approach to overcome endogeneity caused by foreign acquisitions. The empirical results consistently show that foreign acquisitions have significantly improved TFP, value-added, EBIT, etc, of target firms. In addition, the impact of foreign acquisitions is more significant in targets acquired by OECD acquirers, with foreign majority ownership and one-off deals. These findings have policy implications concerning industrial upgrading and foreign acquisitions in China.
Almeida, R., 2007, “The Labor market Effects of Foreign Owned Firms”, Journal of International Economics, 72(1), pp.75-96.
[11]
Arnold, M. J. and S. B. Javorcik, 2009, “Gifted kids or Pushy Parents？ Foreign Direct Investment and Plant Productivity in Indonesia”, Journal of International Economics, 79(1), pp. 42-53.
[12]
Bandick, R., 2011, “Foreign Acquisition, Wages and Productivity”, The World Economy, 34(6), pp. 931-951.
[13]
Benfratello, L. and A. Sembenelli, 2002, “Foreign Ownership and Productivity: Is the Direction of Causality so Obvious？”, Development Working Papers, 24(2), pp. 733-751.
[14]
Bertrand, O. and H. Zitouna, 2008, “Domestic versus Cross-border Acquisitions: Which Impact on the Target Firms’ Performance？”, Applied Economics, 40(17) , pp. 2221-2238.
[15]
Blundell, R. and C. M. Dias, 2000, “Evaluation Methods for Non-Experimental Data”, Fiscal Studies, 21(4), pp. 427-468.
[16]
Casson, M. C., 1995, The Organization of International Business: Studies in the Economics of Trust, Edward Elgar Publishing.
[17]
Conyon, M., S. Girma, S. Thompson and P. Wright, 2010, “The Productivity and Wage Effects of Foreign Acquisition in the United Kingdom”, Journal of Industrial Economics, 50(1), pp. 85-102.
[18]
Dunning , J. H., 1981, International Production and the Multinational Enterprise, Allen and Unwin Publishing.
[19]
Findlay, R., 1978, “Relative Backwardness, Direct Foreign Investment, and the Transfer of Technology: A Simple Dynamic Model”, Quarterly Journal of Economics, 92(1), pp. 1-16.
[20]
Glass, A. J. and K. Saggi, 1998, “International Technology Transfer and the Technology Gap”, Journal of Development Economics, 55(2), pp. 369-398.
[21]
Harris, R. and C. Robinson, 2002, “The Effect of Foreign Acquisitions on Total Factor Productivity: Plant-level Evidence from U.K. Manufacturing, 1987-1992”, Review of Economics and Statistics, 84(3), pp. 562-568.
[22]
Heckman, J., H. Ichimura and P. Todd, 1998, “Matching As An Econometric Evaluation Estimator”, Review of Economic Studies, 65, pp. 261-294.
[23]
Helpman, E., M. Melitz, and S. R. Yeaple, 2004, “Export versus FDI with Heterogeneous Firms”, American Economic Review, 94(1), pp. 300-316.
[24]
Karpaty, P., 2007, “Productivity Effects of Foreign Acquisitions in Swedish Manufacturing: The FDI productivity issue revisited”, International Journal of the Economics of Business, 14(2), pp. 241-260.
[25]
Levinsohn, J. and A. Petrin, 2003, “Estimating Production Functions Using Inputs to Control for Unobservables”, Review of Economic Studies, 70(2), pp.317-342.
[26]
Markusen, J. R., 1995, “The Boundaries of Multinational Enterprises and the Eheory of International Trade”, Journal of Economic Perspectives, 9(2), pp. 169-189.
[27]
Nocke, V. and Yeaple S., 2007, “Cross-border Mergers and Acquisitions vs. Greenfield Foreign Direct Investment: The Role of Firm Heterogeneity”, Journal of International Economics, 72(2), pp. 336–365.
[28]
Qiu, L. D. and W. Zhou, 2006, “International Mergers: Incentives and Welfare”,Journal of International Economics,68(1), pp. 38–58.
[29]
Ravenscraft, D. J. and F. M. Scherer, 1989, “The Profitability of Mergers”, International Journal of Industrial Organization, 7(1), pp. 101–116.
[30]
Smith, J. and P. Todd, 2005, “Does Matching Overcome Lalonde’s Critique of Non-experimental Estimators？” Journal of Econometrics, 125(1-2), pp. 305-353.
