Growing Lemons and Cherries? Pre- and Post-Acquisition Performance of Foreign-Acquired Firms in New EU-Member States

33 Pages Posted: 15 Jun 2013

See all articles by Jože P. Damijan

Jože P. Damijan

University of Ljubljana, Slovenia - Department of International Economics

Črt Kostevc

University of Ljubljana - Faculty of Economics

Matija Rojec

University of Ljubljana - Faculty of Social Sciences

Date Written: September 5, 2012

Abstract

Foreign acquisitions are an increasingly important mode of FDI in the new EU member states (NMS). Using firm-level data and a common estimation framework for seven NMS we study pre-and post- acquisition performance of acquired firms. We find that selection criteria of target firms differ significantly across countries. In some countries the evidence supports the idea of “cherry picking” with better firms being chosen as targets for acquisition, while in the others “lemons” with growth potential tend to get selected. Regardless of whether “cherries” or “lemons” are targeted, performance of acquired firms improved after the acquisition, whereby the boost in productivity has not been achieved by a reduction in employment, as it even increased, but rather by increased efficiency in the use of labor and especially capital. Additionally, foreign ownership is found to yield biggest rewards to small, less productive firms.

Keywords: cross-border mergers and acquisitions, …firm productivity, picking lemons

JEL Classification: F23, D22

Suggested Citation

Damijan, Joze P. and Kostevc, Crt and Rojec, Matija, Growing Lemons and Cherries? Pre- and Post-Acquisition Performance of Foreign-Acquired Firms in New EU-Member States (September 5, 2012). Available at SSRN: https://ssrn.com/abstract=2279331 or http://dx.doi.org/10.2139/ssrn.2279331

Joze P. Damijan (Contact Author)

University of Ljubljana, Slovenia - Department of International Economics ( email )

Kardeljeva ploscad 17
Ljubljana, 1000
Slovenia
+386 61 189 24 00 (Phone)
+386 61 189 26 98 (Fax)

Crt Kostevc

University of Ljubljana - Faculty of Economics ( email )

Kardeljeva ploscad 17
Ljubljana, 1000
Slovenia

Matija Rojec

University of Ljubljana - Faculty of Social Sciences ( email )

Kardeljeva ploscad 5
Ljubljana, 1000
Slovenia

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