Abstract
Since the beginning of the 2000s, corporate reorganization through business unit transfer, corporate breakup and M&A has become significantly more active in Japan. Business unit transfers took place frequently in both low-growth industry and R&D-intensive industry. On average, the seller companies are more R&D-intensive than the buyer companies. M&A took place frequently in insurance/securities/banking, air/sea transport, paper/pulp, petroleum and cement industries. In many cases, they were triggered by the changes in competitive conditions due to deregulation or by worsening financial performance. M&As increased the sales growth and the profitability of companies, other than in the cases of the mergers of equals. The mergers of equals brought about the decline of sales growth almost equally as the decline of employment growth. These results indicate that, while there are potential benefits of integration through a M&A, it is not easy to materialize the benefits in the case of a merger of equals where the control right is shared. A strong incentive for the management to enhance the corporate performance may be needed in such a merger.
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- 1.
See Mueller (1997) for a survey on empirical analysis of the effect of mergers on the performance of firms. See Odagiri (1992) regarding a study focusing on Japan. Business historians suggest that mergers played an important role in establishing efficient size and scale of corporations (Chandler (1990)).
- 2.
According to property right theory (Grossman & Hart (1986)), the control right should be given to the party who can contribute more to the output through non-contractible efforts. Financial constraint can matter in the actual allocation of control rights (See Aghion and Tirole (1994)).
- 3.
The difference is statistically significant.
- 4.
- 5.
If the effect on efficiency does not exist, the market share and the revenue of the merged company may decline due to a strategic effect in a standard oligopolistic model (See Salant, Switzer, & Reinolds, 1983; Deneckere & Davidson (1985)). Whether such strategic effects have empirical significance needs further examination.
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Acknowledgment
I would like to thank Masatoshi Kato, Yoshiharu Sakai and Yoshinori Fujita for their excellent assistance for this research. I would like to also thank for the support from the COE project (“Knowledge, Firm and Innovation”) to this research.
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Nagaoka, S. (2010). M&As and Corporate Performance in Japan: Transferring vs. Sharing of Control Right. In: Itami, H., Kusunoki, K., Numagami, T., Takeishi, A. (eds) Dynamics of Knowledge, Corporate Systems and Innovation. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-04480-9_10
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DOI: https://doi.org/10.1007/978-3-642-04480-9_10
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