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

Sponsor: Development Economics and Chief Economist (DEC)

Speaker: Kathryn Dominguez, University of Michigan and NBER


  • Anusha Chari, University of North Carolina at Chapel Hill and NBER
  • Wenjie Chen, George Washington University

Summary: This paper examines the recent upsurge in foreign acquisitions of U.S. firms, specifically focusing on acquisitions made by firms located in emerging markets. Traditionally, foreign direct investment flowed from developed countries to developing countries, bringing with it superior technology, organizational capital, and access to international capital markets, 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.

For Information: Yasmin D Souza

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