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Productivity And Acquisitions In U.S. Coal Mining

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  • David R Merrell
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    Abstract

    This paper extends the literature on the productivity incentives for mergers and acquisitions. We develop a stochastic matching model that describes the conditions under which a coal mine will change owners. This model suggests two empirically testable hypotheses: i. acquired mines will exhibit low productivity prior to being acquired relative to non-acquired mines and ii. extant acquired mines will show post-acquisition productivity improvements over their pre-acquisition productivity levels. Using a unique micro data set on the universe of U.S. coal mines observed from 1978 to 1996, it is estimated that acquired coal mines are significantly less productive than non-acquired mines prior to having been acquired. Additionally, there is observable and significant evidence of post-acquisition productivity improvements. Finally, it is found that having been acquired positively and significantly influences the likelihood that a coal mine fails.

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    File URL: ftp://ftp2.census.gov/ces/wp/1999/CES-WP-99-17.pdf
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    Bibliographic Info

    Paper provided by Center for Economic Studies, U.S. Census Bureau in its series Working Papers with number 99-17.

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    Date of creation: Dec 1999
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    Handle: RePEc:cen:wpaper:99-17

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

    References

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    1. George S Olley & Ariel Pakes, 1992. "The Dynamics Of Productivity In The Telecommunications Equipment Industry," Working Papers 92-2, Center for Economic Studies, U.S. Census Bureau.
    2. Ariel Pakes & Richard Ericson, 1989. "Empirical Implications of Alternative Models of Firm Dynamics," NBER Working Papers 2893, National Bureau of Economic Research, Inc.
    3. Butler, J S & Moffitt, Robert, 1982. "A Computationally Efficient Quadrature Procedure for the One-Factor Multinomial Probit Model," Econometrica, Econometric Society, vol. 50(3), pages 761-64, May.
    4. Jensen, Michael C. & Ruback, Richard S., 1983. "The market for corporate control : The scientific evidence," Journal of Financial Economics, Elsevier, vol. 11(1-4), pages 5-50, April.
    5. Robert H Mcguckin & Bradford J Jensen, 1996. "Firm Performance And Evolution Empirical Regularities In The U.S. Microdata," Working Papers 96-10, Center for Economic Studies, U.S. Census Bureau.
    6. Joskow, Paul L, 1987. "Contract Duration and Relationship-Specific Investments: Empirical Evidence from Coal Markets," American Economic Review, American Economic Association, vol. 77(1), pages 168-85, March.
    7. Adam Brandenburger & Ben Polak, 1996. "When Managers Cover Their Posteriors: Making the Decisions the Market Wants to See," RAND Journal of Economics, The RAND Corporation, vol. 27(3), pages 523-541, Autumn.
    8. Jensen, Michael C, 1988. "Takeovers: Their Causes and Consequences," Journal of Economic Perspectives, American Economic Association, vol. 2(1), pages 21-48, Winter.
    9. Matsusaka, John G, 1993. "Target Profits and Managerial Discipline during the Conglomerate Merger Wave," Journal of Industrial Economics, Wiley Blackwell, vol. 41(2), pages 179-89, June.
    10. Roll, Richard, 1986. "The Hubris Hypothesis of Corporate Takeovers," The Journal of Business, University of Chicago Press, vol. 59(2), pages 197-216, April.
    11. Charles Brown & James L. Medoff, 1988. "The Impact of Firm Acquisitions on Labor," NBER Chapters, in: Corporate Takeovers: Causes and Consequences, pages 9-32 National Bureau of Economic Research, Inc.
    12. Shleifer, Andrei & Vishny, Robert W., 1989. "Management entrenchment : The case of manager-specific investments," Journal of Financial Economics, Elsevier, vol. 25(1), pages 123-139, November.
    13. Frank R. Lichtenberg & Donald Siegel, 1987. "Productivity and Changes in Ownership of Manufactoring Plants," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 18(3), pages 643-684.
    14. Morck, Randall & Shleifer, Andrei & Vishny, Robert W, 1990. " Do Managerial Objectives Drive Bad Acquisitions?," Journal of Finance, American Finance Association, vol. 45(1), pages 31-48, March.
    15. Jovanovic, Boyan, 1979. "Job Matching and the Theory of Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 972-90, October.
    16. Ravenscraft, David J. & Scherer, F. M., 1989. "The profitability of mergers," International Journal of Industrial Organization, Elsevier, vol. 7(1), pages 101-116, March.
    17. Mueller, Dennis C, 1969. "A Theory of Conglomerate Mergers," The Quarterly Journal of Economics, MIT Press, vol. 83(4), pages 643-59, November.
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    Cited by:
    1. Black, Dan A. & McKinnish, Terra G. & Sanders, Seth G., 2003. "Does the availability of high-wage jobs for low-skilled men affect welfare expenditures? Evidence from shocks to the steel and coal industries," Journal of Public Economics, Elsevier, vol. 87(9-10), pages 1921-1942, September.

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