Access to finance, foreign ownership and foreign takeovers in Germany
2015 (English)In: Applied Economics, ISSN 0003-6846, E-ISSN 1466-4283, Vol. 47, no 29, 3092-3112 p.Article in journal (Refereed) PublishedText
With this article we present the first microeconometric analysis of the impact of a foreign acquisition on the target firm's access to finance. By using a large database of German firms, we furthermore investigate for the first time the link between foreign ownership and access to finance in Germany, one of the world's leading target countries for FDI. We use newly available comprehensive panel data that we constructed from information collected by the German statistical offices and from credit rating scores supplied by the leading German credit rating agency. We find foreign-owned firms in German manufacturing on average to show slightly more financing restrictions than domestically owned enterprises, but this very small difference diminishes once unobserved heterogeneity is taken into account. We further demonstrate that one reason for this finding is the preference of foreign investors for targets with relatively low creditworthiness. Although the likelihood of a foreign acquisition appears to be correlated with credit rating, there is no impact of foreign takeovers on the credit constraints of the target firms ex post and therefore no support for the hypothesis that foreign takeovers ease financial frictions.
Place, publisher, year, edition, pages
Taylor & Francis Group, 2015. Vol. 47, no 29, 3092-3112 p.
credit constraints, foreign ownership, acquisitions, Germany
Economics and Business
IdentifiersURN: urn:nbn:se:kth:diva-179090DOI: 10.1080/00036846.2015.1011323ISI: 000352804700005OAI: oai:DiVA.org:kth-179090DiVA: diva2:881715
QC 201512112015-12-112015-12-102015-12-11Bibliographically approved