KTH/CESIS Working Paper Series in Economics and Institutions of Innovation
Credit Constraints, Foreign Ownership, and Foreign Takeovers in Germany
() and John P. Weche Gelübcke
Abstract: In this paper we present the first evidence for a link
between foreign ownership and credit constraints for Germany, one of the
world's leading target countries for foreign direct investment.
Furthermore, we contribute to the literature by investigating the impact of
a foreign acquisition on the target firms' credit constraints for the first
time. 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 ind 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
credit-worthiness. Although the likelihood of a foreign acquisition appears
to be correlated with credit constraints, 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
Keywords: credit constraints; foreign ownership; acquisitions; Germany; (follow links to similar papers)
JEL-Codes: F21; F23; G34; (follow links to similar papers)
33 pages, October 30, 2013
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