Productivity, Restructuring, And The Gains From Takeovers
AbstractThis paper investigates how takeovers create value. Using plant-level data, I show that acquirers increase targets’ productivity through more efficient use of capital and labor. Acquirers significantly reduce capital expenditures, wages, and employment in target plants, though output is unchanged. Acquirers improve targets’investment efficiency through better capital reallocation. Moreover, changes in productivity help explain the merging firms’ announcement returns. The combined announcement returns are driven by improvements in target’s productivity. Targets with greater productivity improvements receive higher premiums. These results provide some first empirical evidence on the relation between productivity and stock returns in the context of takeovers.
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Bibliographic InfoPaper provided by Center for Economic Studies, U.S. Census Bureau in its series Working Papers with number 13-18.
Length: 51 pages
Date of creation: Apr 2013
Date of revision:
Takeovers; Announcement returns; Productivity; Investments; Wages; Employment;
Find related papers by JEL classification:
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
- D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-04-20 (All new papers)
- NEP-CWA-2013-04-20 (Central & Western Asia)
- NEP-EFF-2013-04-20 (Efficiency & Productivity)
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- Humphery-Jenner, Mark & Powell, Ronan, 2014. "Firm size, sovereign governance, and value creation: Evidence from the acquirer size effect," Journal of Corporate Finance, Elsevier, vol. 26(C), pages 57-77.
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