Foreign acquisition and firm performance in sub-Saharan Africa: Empirical evidence from Ghana

In this paper, we examine the effect of foreign acquisition on numerous performance outcomes of hitherto indigenously owned firms. We use a 12-year (1991-2002) panel data set of manufacturing firms in Ghana. Taking merit of the availability of feasible preacquisition covariates, we utilise both regression and matching methods with difference-in-differences techniques to handle possible endogeneity due to selection bias of the acquisition decision and inherent firm-level heterogeneity. Our findings confirm that indeed foreign investors tend to target (cherry-pick) high-performing indigenous firms. Additionally, findings from regression analysis reveal positive and significant acquisition effects on average wages, productivity and output. We do not find statistically significant acquisition effects on employment and skill intensity. Robustness check on results using matching and difference-in-differences estimation generally confirms these results with negligible differences. A key recommendation arising from study findings is that developing economies especially in sub-Saharan Africa should strengthen policies that aim to attract more inward foreign investments.