TY - JOUR

T1 - Access to finance, foreign ownership and foreign takeovers in Germany

AU - Wagner, Joachim

AU - Weche Gelübcke, John Philipp

PY - 2015/6/21

Y1 - 2015/6/21

N2 - 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 credit-worthiness. 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.

AB - 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 credit-worthiness. 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.

KW - Economics

KW - acquisitions

KW - credit constraints

KW - foreign ownership

KW - Germany

UR - http://www.scopus.com/inward/record.url?scp=84928434776&partnerID=8YFLogxK

U2 - 10.1080/00036846.2015.1011323

DO - 10.1080/00036846.2015.1011323

M3 - Journal articles

VL - 47

SP - 3092

EP - 3112

JO - Applied Economics

JF - Applied Economics

SN - 0003-6846

IS - 29

M1 - P340

ER -