Which Firms Do Foreigners Buy? Evidence from the Republic of Korea

25 Pages Posted: 20 Apr 2016

See all articles by Caroline L. Freund

Caroline L. Freund

World Bank - Macro, Trade and Investment

Simeon Djankov

London School of Economics & Political Science (LSE); Peterson Institute for International Economics

Date Written: September 1, 2000

Abstract

Growth induces foreign investment, which tends to focus on high-value-added sectors, on larger and more profitable firms, on firms with low debt, and on firms that export a large share of output.

Using data on mergers and acquisitions involving Korean firms, Freund and Djankov identify which sectors and firms attracted foreign investment after the liberalization of investment activity at the end of 1997.

They find that domestic acquisitions are similar to foreign acquisitions by sector (of both the target and the acquiring firm), but that international transactions are larger than Korean transactions. This suggests that consolidation is a two-stage process: Firms consolidate first domestically, then internationally.

The authors also find that foreign investment is focused on high-value-added sectors, on larger and more profitable firms, on firms with low debt, and on firms that export a large share of output. Their results suggest that growth induces foreign investment.

This paper - a product of the Financial Economics Unit, Financial Sector Strategy and Policy Department - is part of a larger effort in the department to study the effect of financial liberalization.

Suggested Citation

Freund, Caroline L. and Djankov, Simeon, Which Firms Do Foreigners Buy? Evidence from the Republic of Korea (September 1, 2000). Available at SSRN: https://ssrn.com/abstract=632521

Caroline L. Freund (Contact Author)

World Bank - Macro, Trade and Investment ( email )

1818 H Street, N.W.
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Washington, DC 20433
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(202)458-0847 (Phone)

HOME PAGE: http://econ.worldbank.org/staff/cfreund

Simeon Djankov

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

Peterson Institute for International Economics ( email )

1750 Massachusetts Avenue, NW
Washington, DC 20036
United States

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