Even though the number of annual takeovers has slightly decreased since the year 2000, acquisitions are still of great importance for companies. In the literature on corporate strategy various motivations for acquisitions are mentioned, among them the aim to secure further growth, the will to improve competitive positioning, and most importantly the goal to enhance performance. Whether acquisitions really have a positive effect on corporate performance, however, is not clear. According to empirical studies, the success rates of acquisitions only lie between 20 and 60 percent.
In view of these rather low and unsteady success rates, researchers in the field of strategic management have in the last 30 years devoted a lot of attention to the analysis of causes for success and failure of acquisitions. Their results show that various factors among them the ownership structure of a company, the size of a company, and the cultural compatibility between the acquisition partners have an influence on acquisition success.
We analyze output growth and risk as the joint outcomes of financial liberalization. Using an industry panel of 55 countries over 45 years, we find that financial liberalization results simultaneously in higher growth and in higher growth variability, measured both as the volatility and the left skewness of the growth process. These effects are stonger in industries that are more externally dependent and face better growth opportunities. Some of the effect of liberalization on growth goes through the channel of increased risk, implying that treating growth and risk independently may overestimate the direct growth effect of liberalization. We also find that the growth benefits of financial liberalization and its costs associated with higher risk are mitigated by strong institutions.
In the analysis of the decision to export it seems sensible to think that firms face costs associated with entering foreign markets that may be sunk in nature. For instance, non-exporting firms have to research foreign demand and competition, establish marketing and distribution channels, adjust their product characteristics and packaging to meet foreign tastes and/or fulfil quality and security legislation of other countries.
Acknowledging the existence of sunk costs implies that current exports depend on past export trajectories and, more interestingly, that transitory changes in trade policy or conditions may lead to permanent changes in market structure, that is, sunk entry or exit costs produce hysteresis in export flows. Furthermore, when there is uncertainty about market conditions, the existence of sunk costs affects the entry and exit patterns as trade flows are less responsive to changes in market conditions, such as exchange rates or incentives (subsidies) for exports.
