Post-Acquisition Performance of Croatian Companies Acquired by Foreigners

Abstract

The issue on whether foreign owners bring prosperity to individual firms and to society is highly debated in Croatia. It arises especially at times when there is a sell-out of a larger Croatian company to a foreign business group. In this paper we study the influence of ownership structures on the financial performance of Croatian companies by comparing firms with a majority share of foreign ownership, with companies that are still dominantly owned by the government privatization fund. We also look at companies privatized through ESOP programs as a third referential group. The study departs from the hypothesis that ownership structures affect governance and so can lead to better firm performance providing owners have the authority to act and possess pertinent information and adequate incentives. We examine a sample of 63 firms for ownership-performance relations and attempt to give explanations of possible reasons why should firms acquired by foreigners, especially company groups, perform better. Our study does indicate that foreign owners achieve better financial performance than other ownership structures. However, based on our research alone, we cannot argue that such performance results solely out of better governance.