Quotation Altzinger, Wilfried. 2008. The Time Pattern of Profitability - Do Greenfield Investments and M&As behave differently?. In: Foreign Direct Investment, Growth and Labour Market Performance: Empirical Evidence from the New EU Countries, Hrsg. Maria Birsan, Gabor Hunya, Iulia Siedschlag, 117-130. Cluj-Napoca: Editura Fundatiei Pentru Studii Europene.


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Abstract

Austrian foreign direct investment increased quickly since 1992. The profitability of these investments did improve over the full period under consideration (1992 to 2005). In particular investments in Central and Eastern Europe became rather profitable. In 2005 total annual profits translate into an average return on equity (RoE) of 8.3%. However, returns differ to a large extent by regions. They are 5.1% and 9.7% for EU-14 and for CEE-5 respectively. The age of investment is the main determinate of profitability. Further, there are strong differences between Greenfield investments and M&As. While the latter are always more profitable in EU-15 this is not the case for affiliates in CEE. In these countries we can observe a time-dependent development. During the first years of investments M&A are more profitable than Greenfield investments. However, the latter become more rewarding by older vintages. We further examine if profits are either reinvested (and thereby contribute to the existing stock of capital in the host country) or repatriated (and thereby improve the performance of home countries). The paper shows that patterns differ substantially by countries and over time. The share of reinvestment is much higher in CEE than in EU-15. Moreover, M&A show much higher rates of repatriation than Greenfield investments independent of host countries.

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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Chapter in edited volume
Language German
Title The Time Pattern of Profitability - Do Greenfield Investments and M&As behave differently?
Title of whole publication Foreign Direct Investment, Growth and Labour Market Performance: Empirical Evidence from the New EU Countries
Editor Maria Birsan, Gabor Hunya, Iulia Siedschlag
Page from 117
Page to 130
Location Cluj-Napoca
Publisher Editura Fundatiei Pentru Studii Europene
Year 2008
ISBN 978-973-7677-91-4

Associations

People
Altzinger, Wilfried (Details)
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Institute for Macroeconomics IN (Details)
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