Good for the Environment, Good for Business: Foreign Acquisitions and Energy Intensity

Beata Javorcik, Arlan Brucal and Inessa Love

No 13810, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: The link between foreign ownership and environmental performance remains a controversial issue. This paper contributes to our understanding of this subject by analyzing the impact of foreign acquisitions on plant-level energy intensity. The analysis applies a difference-in-differences approach combined with propensity score matching to the data from the Indonesian Manufacturing Census for the period 1983-2001 (or 1983-2008 in robustness checks). It covers 210 acquisition cases where an acquired plant is observed two years before and at least three years after an ownership change and for which a carefully selected control plant exists. The results suggest that while foreign ownership increases the overall energy usage due to expansion of output, it decreases the plant's energy intensity. Specifically, acquired plants reduce energy intensity by about 30% two years after acquisition, relative to the control plants. In contrast, foreign divestments tend to increase energy intensity. At the aggregate level, entry of foreign-owned plants is associated with industry-wide reduction in energy intensity.

Keywords: Fdi; Foreign acquisition; Foreign divestment; Energy intensity; Indonesia (search for similar items in EconPapers)
JEL-codes: F21 Q56 (search for similar items in EconPapers)
Date: 2019-06
New Economics Papers: this item is included in nep-ene, nep-env, nep-int and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (42)

Downloads: (external link)
https://cepr.org/publications/DP13810 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: Good for the environment, good for business: Foreign acquisitions and energy intensity (2019)
Working Paper: Good for the environment, good for business: foreign acquisitions and energy intensity (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:13810

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP13810

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().