Foreign Ownership and Corporate Restructuring: Direct Investment by Emerging-Market Firms in the United States

Anusha Chari, Wenjie Chen (wchen@imf.org) and Kathryn Dominguez

No 601, Working Papers from Research Seminar in International Economics, University of Michigan

Abstract: This paper examines the recent upsurge in foreign direct investment by emerging-market firms into the United States. Traditionally, direct investment flowed from developed to developing countries, bringing with it superior technology, organizational capital, and access to international capital markets, yet increasingly there is a trend towards Òcapital flowing uphillÓ with emerging market investors acquiring a broad range of assets in developed countries. Using transaction-specific information and firm-level accounting data we evaluate the operating 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.

Keywords: foreign direct investment; capital flows; emerging markets; acquisitions; firm performance (search for similar items in EconPapers)
JEL-codes: F21 F37 G34 (search for similar items in EconPapers)
Pages: 56 pages
Date: 2009-11
New Economics Papers: this item is included in nep-bec, nep-ifn and nep-int
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:mie:wpaper:601

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