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The Market for Corporate Assets: Who Engages in Mergers and Asset Sales and are there Efficiency Gains?

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Author Info
Gordon M Phillips
Vojislav Maksimovic

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Abstract

We analyze the market for firms, divisions, and plants of manufacturing firms using a large sample of plant-level data for the period 1974-92. There is an active market for corporate assets, with over 7 percent of plants transacted through mergers and asset sales in expansion years in the economy. Transactions through partial firm sales represent more than half of these transactions. The probability of asset sales and full firm transactions is related to firm organization and buyer and seller ex ante productivity. We find that these transactions result in ex post productivity increases especially for asset sales from peripheral divisions of selling firms to main divisions of other buyers. Finally we find that productivity increases are significantly higher the more productive the buying firm. This timing of sales and the pattern of productivity gains suggests that the transactions that occur, especially through asset sales of plants and divisions, tend to improve the allocation of resources and are consistent with a simple neoclassic model of profit maximizing by firms. The decision to participate in the market for corporate assets and the subsequent gains realized from transactions are affected both by firm productivity and firm organization.

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File URL: http://www.ces.census.gov/index.php/ces/cespapers?down_key=101583
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Publisher Info
Paper provided by Center for Economic Studies, U.S. Census Bureau in its series Working Papers with number 99-12.

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Date of creation: Sep 1999
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Handle: RePEc:cen:wpaper:99-12

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Related research
Keywords: CES; economic; research; micro; data; microdata; chief; economist;

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  1. Lars Calmfors & Giancarlo Corsetti & Seppo Honkapohja & Gilles Saint-Paul & Hans-Werner Sinn & John Kay & Jan-Egbert Sturm & Xavier Vives, 2006. "Chapter 5: Mergers and Competition Policy in Europe," EEAG Report on the European Economy, CESifo Group Munich, vol. 0, pages 101-116, 03. [Downloadable!]
  2. Köke, Jens, 2000. "Control transfers in corporate Germany : their frequency, causes and consequences," ZEW Discussion Papers 00-67, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  3. Lars Calmfors & Giancarlo Corsetti & Seppo Honkapohja & John Kay & Gilles Saint-Paul & Hans-Werner Sinn & Jan-Egbert Sturm & Xavier Vives, 2006. "EEAG European Economic Advisory Group at CESifo: Report on the European Economy 2006," EEAG Report on the European Economy, CESifo Group Munich, vol. 0, pages 1-120, 03. [Downloadable!]
    Other versions:
  4. Heiss, Florian & Köke, Jens, 2001. "Dynamics in ownership and firm survival : evidence from corporate Germany," ZEW Discussion Papers 01-63, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  5. Albert Banal-Estanol & Paul Heidhues & Rainer Nitsche & Jo Seldeslachts, 2009. "Screening and Merger Activity," Discussion Papers 270, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich. [Downloadable!]
  6. HOSONO Kaoru & TAKIZAWA Miho & TSURU Kotaro, 2009. "Mergers, Innovation, and Productivity: Evidence from Japanese manufacturing firms," Discussion papers 09017, Research Institute of Economy, Trade and Industry (RIETI). [Downloadable!]
  7. Frederik P. Schlingemann & Rene M. Stulz & Ralph A. Walkling, 2000. "Asset Liquidity and Segment Divestitures," NBER Working Papers 7873, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. Campa, Jose M. & Chang, Kevin & Refalo, James F., 2000. "Options-based analysis of emerging market exchange rate expectations: Brazil's real plan, 1994-1999, An," IESE Research Papers D/425, IESE Business School. [Downloadable!]
  9. Shutao Cao, 2008. "A Model of Costly Capital Reallocation and Aggregate Productivity," Working Papers 08-38, Bank of Canada. [Downloadable!]
  10. Mohitosh Kejriwal & Pierre Perron, 2007. "Data Dependent Rules for the Selection of the Number of Leads and Lags in the Dynamic OLS Cointegrating Regression," Boston University - Department of Economics - Working Papers Series WP2007-018, Boston University - Department of Economics. [Downloadable!]
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  11. Hege, Ulrich & Lovo, Stefano & Slovin, Myron & Sushka, Marie, 2006. "Equity and cash in intercorporate asset sales : theory and evidence," Les Cahiers de Recherche 859, HEC Paris. [Downloadable!]
    Other versions:
  12. Goto, Mika & Low, Angie & Makhija, Anil K., 2008. "Diversification, Productivity, and Financial Constraints Empirical Evidence from the US Electric Utility Industry," Working Paper Series 2008-3, Ohio State University, Charles A. Dice Center for Research in Financial Economics. [Downloadable!]
  13. Campa, Jose M. & Kedia, Simi, 2000. "Explaining the diversification discount," IESE Research Papers D/424, IESE Business School. [Downloadable!]
    Other versions:
  14. Gerard Hoberg & Gordon M. Phillips, 2008. "Product Market Synergies and Competition in Mergers and Acquisitions," NBER Working Papers 14289, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  15. Köke, Jens, 2001. "Determinants of acquisition and failure : stylized facts and lessons for empirical studies," ZEW Discussion Papers 01-30, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  16. Marcus Clements & Harminder Singh & Antonie Van Eekelen, 2007. "Trading in Target Stocks Before Takeover Announcements: An Analysis of Stock and Option Markets," Accounting, Finance, Financial Planning and Insurance Series 2007_20, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance. [Downloadable!]
  17. Friberg, Richard & Norbäck, Pehr-Johan & Persson, Lars, 2008. "Getting a Better Price: Strategic Behaviour before Changes in Ownership of Corporate Assets," Working Paper Series 777, Research Institute of Industrial Economics. [Downloadable!]
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