Abstract
AbstractThe authors provide evidence on the impact of foreign ownership on labor market outcomes analyzing pay differences between foreign-acquired and domestically owned firms. For this purpose, they use firm-level data from 16 European countries over the time period 1999–2006. Combing propensity score matching techniques with difference-in-differences (DID) estimators the authors estimate positive wage premia of cross-border merger and acquisitions (M&As), suggesting that foreign-acquired firms exhibit higher short-run (postacquisition) wage growth than their domestic counterparts. The observed wage disparities are most pronounced for low paying firms (with average wages below the median) which are typically located in Eastern European transition economies.
Highlights
Since two or three decades there is a lively debate among social scientists on how the still ongoing process of globalization has changed the social and economic environment in developing countries and in the developed world
The positive wage effects of cross-border mergers and acquisitions (M&As) seem to be most pronounced for firms located in Eastern European countries
In qualitative terms and in line with the Finnish evidence reported by Huttunen (2007), our results indicate that M&As induce positive wage effects in the second year after the respective transaction
Summary
Since two or three decades there is a lively debate among social scientists on how the still ongoing process of globalization has changed the social and economic environment in developing countries and in the developed world. Recent studies have argued that such differences do not necessarily indicate any causal effects of foreign takeovers (see, e.g., Almeida 2007) Rather, they propose to analyze pay differences in firms with ownership changes, especially for cross boarder mergers and acquisitions (M&As). Relying mainly on firm-level data from single countries and allowing for non-random selection of acquisition targets, these studies find insignificant or even positive wage premia of cross-border M&As.. We follow previous research such as Girma and Görg (2007) and apply propensity score matching techniques to account for a systematic selection of M&A targets and combine this approach with a difference-in-differences (DID) estimator This allows us to control for unobserved time-invariant heterogeneity across M&A targets and non-acquired firms.
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