Global Capital and Local Consequences: The Real and Financial Effects of Foreign Acquisitions in India

ABSTRACT This study employs firm‐level data to investigate the causal effects of foreign acquisitions on both real economic outcomes and financial performance metrics of target firms. To address potential selection bias arising from the non‐random acquisition patterns of domestic enterprises by foreign investors—a process characterized by the systematic targeting of high‐performing local firms by international entities—we employ advanced econometric methods designed to account for heterogeneous treatment effects. Furthermore, a comparative analysis between foreign and domestic acquisitions is conducted to isolate the specific effects attributable to foreign ownership, distinct from general acquisition dynamics. Empirical findings from comprehensive data on Indian firms demonstrate that foreign acquisitions yield substantial financial improvements but do not confer significant productivity advantages relative to domestic acquisitions.