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Firm performance following foreign acquisitions in Norway: Evidence of profit shifting?**

Julia Tropina Bakke
Julia Tropina Bakke
   | 22 abr 2024
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Article Category: Article
Publicado en línea: 22 abr 2024
Páginas: 1 - 21
Recibido: 18 may 2020
Aceptado: 26 sept 2022
DOI: https://doi.org/10.2478/ntaxj-2023-0001
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© 2023 J. Tropina Bakke, published by Sciendo
This work is licensed under the Creative Commons Attribution 4.0 International License.

Summary statistics for the main covariates

Inward FDI
Variable Total Purely domestic pre-acq. acq. post-acq.
Return on sales 0.0997 0.1002 0.0591 0.0604 0.0587
(0.2389) (0.2393) (0.2078) (0.2252) (0.2004)
Return on total assets 0.0884 0.0885 0.0818 0.0647 0.0771
(0.2035) (0.2032) (0.2161) (0.2439) (0.2226)
Operating profit margin (EBITDA) 0.2114 0.2126 0.1442 0.1254 0.1109
(0.2975) (0.2979) (0.2675) (0.2639) (0.2327)
Total assets turnover 2.136 2.136 2.140 2.069 2.207
(1.924) (1.928) (1.636) (1.524) (1.466)
Current ratio 1.744 1.745 1.669 1.603 1.789
(2.158) (2.162) (1.843) (1.614) (1.952)
Interest coverage 27.25 27.14 30.99 33.44 42.09
(91.11) (90.79) (98.72) (107.75) (125.14)
Sales 13,720 13,107 38,040 62,109 79,792
(98,263) (95,391) (128,370) (336,146) (255,406)
Total assets 11,208 10,795 31,246 48,001 49,806
(116,197) (113,666) (189,080) (324,952) (246,586)
Fixed assets 4,104 4,048 8,650 11,850 6,207
(63,876) (63,367) (93,019) (186,535) (24,221)
Labor costs 2,262 2,146 7,603 11,635 13,650
(12,796) (11,934) (27,466) (72,487) (39,394)
Material costs 7,977 7,642 20,294 30,328 46,557
(74,241) (72,707) (86,936) (138,373) (195,346)
Labor cost share 0.2059 0.2057 0.2281 0.2222 0.2112
(0.1859) (0.1858) (0.1924) (0.1922) (0.1793)
Material cost share 0.3546 0.3537 0.3899 0.4126 0.4550
(0.3121) (0.3122) (0.3016) (0.3040) (0.2953)
Other operating costs share 0.2832 0.2833 0.2815 0.2778 0.2559
(0.2168) (0.2169) (0.2209) (0.2094) (0.2054)
Tangibility 0.2619 0.2634 0.1940 0.1411 0.1111
(0.3388) (0.3395) (0.2911) (0.2734) (0.2301)
Leverage 0.7791 0.7794 0.7652 0.7823 0.7381
(0.2582) (0.2580) (0.2563) (0.2798) (0.2852)
Market share 0.0031 0.0029 0.0105 0.0133 0.0170
(0.0261) (0.0253) (0.0528) (0.0584) (0.0689)
Loss-making 0.2460 0.2458 0.2512 0.3163 0.2606
(0.4307) (0.4306) (0.4338) (0.4653) (0.4390)
Age 11.72 11.71 11.57 10.23 13.41
(13.79) (13.77) (15.77) (13.75) (13.71)
Obs. 629,919 621,123 4,367 1,040 3,389

ATT matching estimates, profitability measures

ATT
Taxable income/Sales (1) EBITDA/Sales (2) Total assets (3)
Differences Benchmark: 3 years average prior to acquisition
The year of acquisition −0.004 −0.012 −0.006
(−0.474) (−1.160) (−0.893)
1 year after acquisition −0.015 −0.038 −0.014
(−1.508) (−3.387) (−1.613)
2 years after acquisition −0.019 −0.047 −0.018
(−1.982) (−3.889) (−2.019)
3 years after acquisition −0.022 −0.033 −0.012
(−2.003) (−2.706) (−1.196)
4 years after acquisition −0.042 −0.059 −0.019
(−3.421) (−4.683) (−1.771)
Average (4 years after acquisition) −0.030 −0.052 −0.018
(−3.996) (−5.490) (−2.636)

Balancing test: Taxable income/ Total assets

Variable Matching status Mean (Treated) Mean (Controls) % bias % reduction in bias t-test p-value
Taxable income/Sales Unmatched 0.0761 0.0857 −6.7 −0.79 0.428
Matched 0.0761 0.0780 −1.3 80.0 −0.13 0.897
Tangibility Unmatched 0.1493 0.2862 −53.4 −5.80 0.000
Matched 0.1493 0.1489 0.1 99.7 0.01 0.988
Market share Unmatched 0.0225 0.0031 30.1 10.80 0.000
Matched 0.0225 0.0129 15.0 50.4 1.22 0.223
Ln (Total Assets) Unmatched 9.255 7.916 99.0 13..60 0.000
Matched 9.255 9.199 4.1 95.8 0.33 0.744
Age q1 Unmatched 0.1975 0.2601 5.9 0.76 0.449
Matched 0.1975 0.2484 8.6 −44.2 0.76 0.446
Age q2 Unmatched 0.2612 0.3058 −9.9 −1.21 0.224
Matched 0.2612 0.2739 −2.8 71.5 −0.25 0.800
Age q3 Unmatched 0.2025 0.21145 0.3 0.04 0.968
Matched 0.2229 0.18 −4.7 −1395 −0.41 0.681
Age q4 Unmatched 0.2484 0.2315 4.0 0.50 0.616
Matched 0.2484 0.2548 −1.5 62.3 −0.13 0.897
Industry group 1 Unmatched 0.1975 0.1713 6.7 0.87 0.384
Matched 0.1975 0.1656 8.2 -21.6 0.73 0.466
Industry group 2 Unmatched 0.4013 0.1529 57.6 8.64 0.000
Matched 0.4013 0.4268 −5.9 89.7 −0.46 0.648
Industry group 3 Unmatched 0.0701 0.3259 −67.7 −6.84 0.000
Matched 0.0701 0.0510 5.1 92.5 0.71 0.479
Industry group 4 Unmatched 0.0892 0.0660 8.7 1.17 0.242
Matched 0.0892 0.1147 −9.5 −9.8 −0.74 0.457
Industry group 5 Unmatched 0.0892 0.1544 -20.0 −2.26 0.024
Matched 0.0892 0.0764 3.9 80.5 0.41 0.683
Industry group 6 Unmatched 0.1529 0.1295 6.7 0.87 0.384
Matched 0.1529 0.1656 −3.7 45.4 −0.31 0.759

ATT matching estimates: robustness tests

ATT
Acq. Taxable income/Sales (1) Taxable income/Total assets (2) EBITDA/Sales (3)
Differences (4 years after acquisition (average) - 3 years prior to acquisition (average))
I. Original sample 155 −0.030 −0.052 −0.018
(−3.996) (−5.490) (−2.636)
II. Excluding loss-making firms 124 −0.027 −0.038 −0.016
(−3.459) (−4.000) (−2.168)
III. Foreign ownership share over 90% 129 −0.038 −0.061 −0.024
(−4.976) (−5.554) (−3.456)

ATT matching estimates: different matching methods

ATT
Taxable income/ Sales (1) Taxable income/ Total assets (2) EBITDA/Sales (3)
Differences (4 years after acquisition (average) - 3 years prior to acquisition (average))
Nearest neighbor matching −0.030 −0.052 −0.018
(−3.996) (−5.490) (−2.636)
Kernel matching −0.031 −0.050 −0.025
(−3.65) (−2.80) (−2.60)
Radius matching −0.031 −0.050 −0.023
(−2.03) (−3.28) (−2.55)

Covariate balancing tests (Taxable income/Sales)

Number of t treated (1) Number of (2) Probit pseudo R-squared before (3) Probit pseudo R-squared after (4) Median bias, before (5) Median bias, after (6)
0 (year of acquisition) 568 389,181 0.116 0.011 16.8 2.6
1st year post acquisition 413 320,833 0.121 0.009 18.6 2.7
2nd year post acquisition 311 268,098 0.130 0.010 20.4 2.7
3rd year post acquisition 241 221,337 0.150 0.015 22.2 4.3
4th year post acquisition 169 179,851 0.162 0.029 16.6 5.6
4 years post acquisition (average) 157 167,658 0.167 0.028 18.1 3.9

ATT matching estimates, cost items

ATT
Material costs of Goods sold /Sales (1) Labor costs/Sales (2) Other operating costs /Sales (3)
Differences Benchmark: 3 years average prior to acquisition
The year of acquisition 0.006 −0.005 0.003
(0.963) (−1.112) (0.446)
1 year after acquisition 0.034 −0.014 −0.010
(4.487) (−2.685) (−1.366)
2 years after acquisition 0.018 −0.005 0.000
(2.213) (−0.877) (0.014)
3 years after acquisition 0.027 −0.011 −0.003
(2.765) (−1.901) (−.330)
4 years after acquisition 0.029 −0.002 −0.009
(2.710) (−0.256) (−0.966)
Average (4 years after acquisition) 0.020 0.000 −0.000
(2.682) (0.038) (−0.020)

propensity score estimation — probit results

Coefficient Standard Error P-value
Return on sales −0.4463*** (0.0973) 0.000
Tangibility −0.3929*** (0.0711) 0.000
Market share 0.5742** (0.2856) 0.044
Ln(Total Assets) 0.1765*** (0.0099) 0.000
Age Q2 −0.1496*** (0.0377) 0.000
Age Q3 −0.1676*** (0.0395) 0.000
Age Q4 −0.2554*** (0.0401) 0.000
Year dummy variables Yes
Industry dummy variables Yes
Region dummy variables Yes
Pseudo R-squared 0.1160
LR chi-squared 992.08
Observations 389,749
Treated 568
Non-treated 389,181

ATT matching estimates, other performance indicators

ATT
Sales (1) Taxable Income (2) Total Assets (3) Fixed Assets (4) Leverage Ratio (5)
Differences Benchmark: 3 years average prior to acquisition
The year of acquisition 0.067 0.147 0.114 0.041 −0.031 (−2.917)
(2.527) (2.464) (4.822) (1.007)
1 year after acquisition 0.196 0.166 0.175 0.151 −0.005
(6.273) (2.559) (6.093) (2.585) (−.418)
2 years after acquisition 0.236 0.289 0.198 0.031 −0.028
(6.311) (3.631) (5.872) (.422) (−1.815)
3 years after acquisition 0.268 0.252 0.242 0.260 −0.068
(5.981) (2.850) (6.221) (3.368) (−3.987)
4 years after acquisition 0.296 0.218 0.300 0.410 0.092
(5.382) (2.312) (6.138) (4.315) (1.249)
Average (4 years after acquisition) 0.293 0.202 0.298 0.258 −0.040
(8.450) (2.377) (8.712) (3.090) (−3.041)

Number of observations over time

Inward FDI
Year Total Purely domestic pre-acquisition acquisition post-acquisition
1994 40,225 39,754 392 79 0
1995 42,876 42,346 428 30 72
1996 45,722 45,163 423 32 104
1997 48,895 48,273 468 27 127
1998 51.741 51,041 513 34 153
1999 53,185 52,435 500 68 182
2000 54,790 53,988 484 88 230
2001 55,982 55,139 414 124 305
2002 56,292 55,423 343 119 407
2003 58,120 57,237 268 110 505
2004 60,168 59,265 134 172 597
2005 61,923 61,059 0 157 707
Total 629,919 621,123 4,367 1,040 3,389

ATT matching estimates, performance measures

ATT
Change from year before acquisition to Total asset turnover (1) Current ratio (2) Interest coverage (3)
Differences Benchmark: 3 years average prior to acquisition
The year of acquisition −0.107 −0.078 1.554
(−2.20) (−1.047) (0.360)
1 year after acquisition −0.034 0.001 2.415
(−0.719) (0.016) (0.438)
2 years after acquisition 0.055 0.038 −2.584
(1.003) (0.344) (−0.477)
3 years after acquisition 0.029 0.165 0.290
(0.476) (1.367) (0.045)
4 years after acquisition 0.042 0.099 −9.364
(0.619) (0.723) (−1.484)
Average (4 years after acquisition) −0.031 0.074 −4.521
(−0.632) (0.794) (0.949)
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