IDEAS home Printed from https://ideas.repec.org/p/eti/dpaper/22044.html
   My bibliography  Save this paper

The Effect of Investment Funds on Employment and Wages

Author

Listed:
  • KUBO Katsuyuki
  • TSUBONO Kodai

Abstract

We study the effect of investment funds on wages and employment in Japan, with particular emphasis on the possible conflicts of interest between investment funds and the employees of target firms. Investment funds may try to gain profit by reducing wages and employee numbers. We contribute to the literature by analyzing the effect of investment fund on wages and employment in listed firms in Japan, using data from 2007 to 2017. Considering that the activity of investment funds varies across countries, we surmised that it would be interesting to examine Japan’s data. We employ propensity score matching difference in difference method and a triple difference model to examine the impact of investment funds on employment conditions. It is shown that in general, there is a decrease in the number of employees in target firms.

Suggested Citation

  • KUBO Katsuyuki & TSUBONO Kodai, 2022. "The Effect of Investment Funds on Employment and Wages," Discussion papers 22044, Research Institute of Economy, Trade and Industry (RIETI).
  • Handle: RePEc:eti:dpaper:22044
    as

    Download full text from publisher

    File URL: https://www.rieti.go.jp/jp/publications/dp/22e044.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Martin Olsson & Joacim Tåg, 2017. "Private Equity, Layoffs, and Job Polarization," Journal of Labor Economics, University of Chicago Press, vol. 35(3), pages 697-754.
    2. Marianne Bertrand & Sendhil Mullainathan, 2003. "Enjoying the Quiet Life? Corporate Governance and Managerial Preferences," Journal of Political Economy, University of Chicago Press, vol. 111(5), pages 1043-1075, October.
    3. Kevin Amess & Mike Wright, 2007. "The Wage and Employment Effects of Leveraged Buyouts in the UK," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 14(2), pages 179-195.
    4. Ono, Hiroshi, 2010. "Lifetime employment in Japan: Concepts and measurements," Journal of the Japanese and International Economies, Elsevier, vol. 24(1), pages 1-27, March.
    5. April Klein & Emanuel Zur, 2009. "Entrepreneurial Shareholder Activism: Hedge Funds and Other Private Investors," Journal of Finance, American Finance Association, vol. 64(1), pages 187-229, February.
    6. Kevin Amess & Mike Wright, 2012. "Leveraged buyouts, private equity and jobs," Small Business Economics, Springer, vol. 38(4), pages 419-430, May.
    7. Ryo Kambayashi & Takao Kato, 2017. "Long-Term Employment and Job Security over the Past 25 Years," ILR Review, Cornell University, ILR School, vol. 70(2), pages 359-394, March.
    8. Andrei Shleifer & Lawrence H. Summers, 1988. "Breach of Trust in Hostile Takeovers," NBER Chapters, in: Corporate Takeovers: Causes and Consequences, pages 33-68, National Bureau of Economic Research, Inc.
    9. Loris Guery & Anne Stevenot & Geoffrey T. Wood & Chris Brewster, 2017. "The Impact of Private Equity on Employment: The Consequences of Fund Country of Origin—New Evidence from France," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 56(4), pages 723-750, October.
    10. Antoni, Manfred & Maug, Ernst & Obernberger, Stefan, 2019. "Private equity and human capital risk," Journal of Financial Economics, Elsevier, vol. 133(3), pages 634-657.
    11. Goergen, Marc & O׳Sullivan, Noel & Wood, Geoffrey, 2014. "The employment consequences of private equity acquisitions: The case of institutional buy outs," European Economic Review, Elsevier, vol. 71(C), pages 67-79.
    12. Alon Brav & Wei Jiang & Frank Partnoy & Randall Thomas, 2008. "Hedge Fund Activism, Corporate Governance, and Firm Performance," Journal of Finance, American Finance Association, vol. 63(4), pages 1729-1775, August.
    13. Kevin Amess & Sourafel Girma & Mike Wright, 2014. "The Wage and Employment Consequences of Ownership Change," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 35(2), pages 161-171, March.
    14. Naoshi Ikeda & Kotaro Inoue & Sho Watanabe, 2018. "Enjoying the Quiet Life: Corporate Decision-making by Entrenched Managers," NBER Chapters, in: Corporate Governance (NBER-TCER-CEPR Conference), National Bureau of Economic Research, Inc.
    15. Hamao, Yasushi & Matos, Pedro, 2018. "U.S.-style investor activism in Japan: The first ten years?," Journal of the Japanese and International Economies, Elsevier, vol. 48(C), pages 29-54.
    16. Tomohiko Noda, 2013. "Determinants of the Timing of Downsizing Among Large Japanese Firms: Long-Term Employment Practices and Corporate Governance," The Japanese Economic Review, Japanese Economic Association, vol. 64(3), pages 363-398, September.
    17. Konari Uchida & Peng Xu, 2008. "US Barbarians at the Japan Gate: Cross Border Hedge Fund Activism," Bank of Japan Working Paper Series 08-E-3, Bank of Japan.
    18. Steven J. Davis & John Haltiwanger & Kyle Handley & Ron Jarmin & Josh Lerner & Javier Miranda, 2014. "Private Equity, Jobs, and Productivity," American Economic Review, American Economic Association, vol. 104(12), pages 3956-3990, December.
    19. Kato, Takao, 2001. "The End of Lifetime Employment in Japan?: Evidence from National Surveys and Field Research," Journal of the Japanese and International Economies, Elsevier, vol. 15(4), pages 489-514, December.
    20. Terukazu Suruga, 1998. "Employment Adjustment in Japanese Firms: Negative Profits and Dismissals," Palgrave Macmillan Books, in: Isao Ohashi & Toshiaki Tachibanaki (ed.), Internal Labour Markets, Incentives and Employment, chapter 9, pages 196-221, Palgrave Macmillan.
    21. Clifford, Christopher P., 2008. "Value creation or destruction? Hedge funds as shareholder activists," Journal of Corporate Finance, Elsevier, vol. 14(4), pages 323-336, September.
    22. Greenwood, Robin & Schor, Michael, 2009. "Investor activism and takeovers," Journal of Financial Economics, Elsevier, vol. 92(3), pages 362-375, June.
    23. Ikeda, Naoshi & Inoue, Kotaro & Watanabe, Sho, 2018. "Enjoying the quiet life: Corporate decision-making by entrenched managers," Journal of the Japanese and International Economies, Elsevier, vol. 47(C), pages 55-69.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Blind, Georg D. & Lottanti von Mandach, Stefania, 2021. "Private Equity Buyouts in Japan: Effects on Employment Numbers," Journal of the Japanese and International Economies, Elsevier, vol. 59(C).
    2. Hiroaki Miyachi & Fumiko Takeda, 2021. "Hedge Fund Activism in Japan under the Stewardship and Corporate Governance Codes," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 27(2), pages 119-130, May.
    3. Renneboog, Luc & Vansteenkiste, Cara, 2017. "Leveraged Buyouts : A Survey of the Literature," Discussion Paper 2017-015, Tilburg University, Center for Economic Research.
    4. Fukuda, Akira, 2020. "The Effects of M&A on Corporate Performance in Japan:DID Analysis in the Era of Corporate Governance Reform," Japan and the World Economy, Elsevier, vol. 55(C).
    5. Antoni, Manfred & Maug, Ernst & Obernberger, Stefan, 2019. "Private equity and human capital risk," Journal of Financial Economics, Elsevier, vol. 133(3), pages 634-657.
    6. Hamao, Yasushi & Matos, Pedro, 2018. "U.S.-style investor activism in Japan: The first ten years?," Journal of the Japanese and International Economies, Elsevier, vol. 48(C), pages 29-54.
    7. Tang, Tingfeng, 2020. "Hedge fund activism and corporate innovation," Economic Modelling, Elsevier, vol. 85(C), pages 335-348.
    8. Tåg, Joacim, 2010. "The Real Effects of Private Equity Buyouts," Working Paper Series 851, Research Institute of Industrial Economics.
    9. Oehler, Andreas & Schmitz, Jonas Tobias, 2021. "Does intensified communication of hedge funds with letters affect abnormal returns?," International Review of Economics & Finance, Elsevier, vol. 76(C), pages 127-142.
    10. Ryan Flugum & Matthew E. Souther, 2020. "External monitoring and returns to hedge fund activist campaigns," Review of Financial Economics, John Wiley & Sons, vol. 38(1), pages 97-140, January.
    11. Martin Olsson & Joacim Tåg, 2017. "Private Equity, Layoffs, and Job Polarization," Journal of Labor Economics, University of Chicago Press, vol. 35(3), pages 697-754.
    12. Yeh, Tsung-ming, 2017. "Determinants and consequences of shareholder proposals: The cases of board election, charter amendment, and profit disposal," Journal of Corporate Finance, Elsevier, vol. 45(C), pages 245-261.
    13. Flugum, Ryan & Howe, John S., 2020. "Hedge fund activism and analyst uncertainty," International Review of Economics & Finance, Elsevier, vol. 66(C), pages 206-227.
    14. Thomas Smythe & Chris McNeil & Philip English, 2015. "When does CalPERS’ activism add value?," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 39(4), pages 641-660, October.
    15. Bessler, Wolfgang & Vendrasco, Marco, 2022. "Corporate control and shareholder activism in Germany: An empirical analysis of hedge fund strategies," International Review of Financial Analysis, Elsevier, vol. 83(C).
    16. Nickolay Gantchev & Oleg R Gredil & Chotibhak Jotikasthira, 2019. "Governance under the Gun: Spillover Effects of Hedge Fund Activism," Review of Finance, European Finance Association, vol. 23(6), pages 1031-1068.
    17. Wolfgang Bessler & Wolfgang Drobetz & Julian Holler, 2015. "The Returns to Hedge Fund Activism in Germany," European Financial Management, European Financial Management Association, vol. 21(1), pages 106-147, January.
    18. Ben Arfa, Nouha & Karmani, Majdi & Labaronne, Daniel, 2017. "Antecedents of hedge fund activism in French listed target firms," Research in International Business and Finance, Elsevier, vol. 42(C), pages 1315-1326.
    19. Ryan Krause & Michael C. Withers, 2022. "Propulsions Toward What Capes? Testing Normative Theory Through a Panorama of Consequences," Journal of Business Ethics, Springer, vol. 181(2), pages 317-333, November.
    20. Ian R. Appel & Todd A. Gormley & Donald B. Keim, 2016. "Standing on the Shoulders of Giants: The Effect of Passive Investors on Activism," NBER Working Papers 22707, National Bureau of Economic Research, Inc.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eti:dpaper:22044. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: TANIMOTO, Toko (email available below). General contact details of provider: https://edirc.repec.org/data/rietijp.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.