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Performance of Exiting Firms in Japan: An Empirical Analysis Using Exit Mode Data

Author

Listed:
  • Yojiro Ito

    (Economist, Institute for Monetary and Economic Studies (currently, Personnel and Corporate Affairs Department), Bank of Japan (E-mail: youjirou.itou@boj.or.jp))

  • Daisuke Miyakawa

    (Associate Professor, Hitotsubashi University Business School (E-mail: dmiyakawa@hub.hit-u.ac.jp))

Abstract

Studies on firm performance have found that exiting firms in Japan persistently show better performance than surviving firms, and this persistence adversely affects aggregate productivity. We use the panel data of business enterprises along with unique information on their exit modes (i.e., default, voluntary closure, and merger) to show that a large part of such a "negative exit effect" is attributed to the firms exiting through mergers. Further, we confirm that the causal effect of those mergers results in positive growth in the productivity of merging firms. Given that the size of such a positive causal effect overwhelms the negative exit effect, resource reallocation through mergers positively contributes to the aggregate growth in productivity for Japanese firms.

Suggested Citation

  • Yojiro Ito & Daisuke Miyakawa, 2022. "Performance of Exiting Firms in Japan: An Empirical Analysis Using Exit Mode Data," IMES Discussion Paper Series 22-E-07, Institute for Monetary and Economic Studies, Bank of Japan.
  • Handle: RePEc:ime:imedps:22-e-07
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    References listed on IDEAS

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    More about this item

    Keywords

    Productivity dynamics; Exit effects; Mergers;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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