An analysis of the effects of maquiladora production on performance

Leslie G. Eldenburg, Francisco Roman, Jenny Teruya

Research output: Contribution to journalArticlepeer-review

1 Scopus citations


This study analyzes financial performance in firms that employ maquiladora production, a manufacturing arrangement utilizing Mexican labor. We argue that although accountants can readily identify and value the obvious benefits of labor savings, they have more difficulty identifying and valuing incremental costs from any frictions encountered. The result is that this offshore labor strategy may not be as cost-effective as it would initially appear. We cannot explicitly measure the costs associated with these frictions; we therefore compare performance of a sample of firms that implemented maquiladora production (treatment firms) with performance of similar firms (control firms), examining median return on assets (ROAs) during periods before and after implementation. Results for the median difference tests suggest that although treatment firms benefit from lower committed costs and lower labor costs, there is no corresponding increase in ROA. Results from the regression models are similar and indicate no differences in ROA after implementation, and no differences in committed costs and labor costs. To identify those firms that could have more difficulty estimating costs and benefits, we partition the maquiladora firms on variance of profits, assuming that high-variance firms may be more cautious in their decision making. We find that compared with the low-variance sample firms, high-variance firms experience increases in ROA after implementing maquiladora production. The production process is another firm characteristic that could influence maquiladora success. As expected, when we partition the maquiladora firms on production technology, we find that maquiladora implementation leads to higher ROAs for low-production technology firms.

Original languageEnglish (US)
Pages (from-to)423-447
Number of pages25
JournalJournal of Accounting, Auditing and Finance
Issue number3
StatePublished - 2007


  • Committed costs
  • Cost-benefit analysis
  • Financial performance
  • Maquiladora production
  • Offshore labor

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics, Econometrics and Finance (miscellaneous)


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