Quotation Bellak, Christian, Pfaffermayr, Michael, Wild, Michael. 2006. Firm Performance after Ownership change: A Matching Estimator Approach. Applied Economics Quarterly 52 (1): 29-54.


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Abstract

Based on balance sheet data of a sample of Austrian manufacturing firms, this paper examines the causal effect of foreign takeovers on the performance (productivity and profitability) and the growth rate of Austrian target firms. Thereby, we consider two hypotheses that an acquired underperforming firm (“lemon”) improves its performance post takeover versus the “cherry picking” (overperformers) view. The latter suggests endogeneity of takeover decisions. Consequently we follow a difference-in-difference approach with endogenous selection using the matching estimator technique. The probit selection model suggests that in general, the risk of being taken over is very low, and that the possibility to improve the market power (indicated by below average profitability) and intangible assets (indicated by above average productivity and export orientation) explain the takeover decision. Our results suggest that in general the effects are small, but post-takeover growth of profitability tends to be significantly higher for “lemons” than for “cherries”. Employment and productivity growth are not significantly affected, independent of the pre-takeover performance and the matching estimator used. Lemons reduce the productivity gap vis-à-vis cherries 4 years after the takeover by 13 percentage points.

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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Journal article
Journal Applied Economics Quarterly
Language English
Title Firm Performance after Ownership change: A Matching Estimator Approach
Volume 52
Number 1
Year 2006
Page from 29
Page to 54
Reviewed? Y

Associations

People
Bellak, Christian (Details)
Wild, Michael (Former researcher)
External
Pfaffermayr, Michael
Organization
Institute for Public Sector Economics IN (Details)
Research Institute for International Taxation FI (Details)
Institute for Economic Policy and Industrial Economics IN (Details)
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