IMPACT OF CROSS-BORDER M&AS ON FIRM EMPLOYMENT THE CASE OF CROATIA

Abstract

Some of the most important aspects of globalization refer to free capital flows and internationalization of firm ownership. This paper reports on some preliminary observations considering two important phenomena that will influence future Croatian economic development: cross-border M&As and employment. So far, in the case of Croatia, cross-border M&As had attracted interest primarily as a source of fresh capital that would nurture future investments in technology, products and markets. Considering the shortage of capital and the slow rate of restructuring underwent by Croatian companies in the nineties, it was only natural that macroeconomic issues relating to capital flows (FDI), gross fixed capital formation and employment would dominate discussion. The issue of relinquishing control that comes along the acquisition of ownership stakes of Croatian companies by foreign owners has come under criticism only more recently. Without providing any final conclusion on the net benefits of cross- border M&As we tried to raise some evidence on the behavior of foreign owners as compared to domicile owners. In this paper we focus on employment, first because we believe employment may serve as an indicator of “broad” social impact of cross- border M&As and second, because of methodological reasons. We analyzed company data provided by the Croatian Securities Exchange (now HANFA). We found that it is not so much the type (nationality) of owners that affects labor practices, but first and utmost, business performance in terms of profits and losses.