IDEAS home Printed from https://ideas.repec.org/p/mcm/deptwp/2025-03.html

Ownership Changes and Firm Dynamics

Author

Listed:
  • Bettina Bruggemann
  • Zachary L. Mahone
  • Thomas Palmer

Abstract

Ownership changes are common across firms of all sizes, and they have meaningful impacts on firm performance. Using a panel of Canadian administrative data we document that sales are an important margin in the firm life cycle, larger than exit rates for employer firms. Applying an event-study framework, we find that (a) survival rates initially decline post sale, leveling off after three years and (b) conditional on survival, profits are permanently higher. Embedding ownership changes in a model of firm dynamics, we find that 4.5% of entrants survive due to the option value of sale and that, within ten years from birth, 13% of dispersion in firm size is attributable to realized ownership changes. Moreover, ownership changes are particularly important for high productivity firms, accounting for one quarter of revenue concentration among the top 1% of businesses.

Suggested Citation

  • Bettina Bruggemann & Zachary L. Mahone & Thomas Palmer, 2025. "Ownership Changes and Firm Dynamics," Department of Economics Working Papers 2025-03, McMaster University.
    • Handle: RePEc:mcm:deptwp:2025-03
    as

    Download full text from publisher

    File URL: http://socialsciences.mcmaster.ca/econ/rsrch/papers/archive/2025-03.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Guido Menzio & Shouyong Shi, 2011. "Efficient Search on the Job and the Business Cycle," Journal of Political Economy, University of Chicago Press, vol. 119(3), pages 468-510.
    2. Kankanamge, Sumudu & Gaillard, Alexandre, 2020. "Buying and Selling Entrepreneurial Assets," TSE Working Papers 20-1078, Toulouse School of Economics (TSE).
    3. Michael Ewens & Matt Marx, 2018. "Founder Replacement and Startup Performance," The Review of Financial Studies, Society for Financial Studies, vol. 31(4), pages 1532-1565.
    4. Zachary Mahone, 2023. "Business Ownership and the Secondary Market," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 51, pages 1114-1158, December.
    5. Hopenhayn, Hugo & Rogerson, Richard, 1993. "Job Turnover and Policy Evaluation: A General Equilibrium Analysis," Journal of Political Economy, University of Chicago Press, vol. 101(5), pages 915-938, October.
    6. Frank R. Lichtenberg & Donald Siegel, 1989. "The Effect Of Control Changes On The Productivity Of U.S. Manufacturing Plants," Journal of Applied Corporate Finance, Morgan Stanley, vol. 2(2), pages 60-67, June.
    7. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-670, May.
    8. Hopenhayn, Hugo A, 1992. "Entry, Exit, and Firm Dynamics in Long Run Equilibrium," Econometrica, Econometric Society, vol. 60(5), pages 1127-1150, September.
    9. Nir Jaimovich & Stephen J. Terry & Nicolas Vincent, 2023. "The Empirical Distribution of Firm Dynamics and Its Macro Implications," NBER Working Papers 31337, National Bureau of Economic Research, Inc.
    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. Cristina Fernández & Roberta García & Paloma Lopez-Garcia & Benedicta Marzinotto & Roberta Serafini & Juuso Vanhala & Ladislav Wintr, 2017. "Firm growth in Europe: An overview based on the COMPNET labour module," BCL working papers 107, Central Bank of Luxembourg.
    2. Riadh Ben Jelili, "undated". "Firm Heterogeneity and Productivity: The Contribution of Microdata," API-Working Paper Series 1013, Arab Planning Institute - Kuwait, Information Center.
    3. Viktoria Kocsis & Victoria Shestalova & Henry van der Wiel & Nick Zubanov & Ruslan Lukach & Bert Minne, 2009. "Relation entry, exit and productivity: an overview of recent theoretical and empirical literature," CPB Document 180, CPB Netherlands Bureau for Economic Policy Analysis.
    4. Hugo A. Hopenhayn, 2013. "On the Measure of Distortions," 2013 Meeting Papers 189, Society for Economic Dynamics.
    5. Bergoeing, Raphael & Loayza, Norman & Repetto, Andrea, 2004. "Slow recoveries," Journal of Development Economics, Elsevier, vol. 75(2), pages 473-506, December.
    6. Aw, Bee Yan & Chen, Xiaomin & Roberts, Mark J., 2001. "Firm-level evidence on productivity differentials and turnover in Taiwanese manufacturing," Journal of Development Economics, Elsevier, vol. 66(1), pages 51-86, October.
    7. GABLER, Alain & POSCHKE, Markus, 2011. "Growth through Experimentation," Cahiers de recherche 11-2011, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
    8. A. Kerem Co?ar & Nezih Guner & James Tybout, 2016. "Firm Dynamics, Job Turnover, and Wage Distributions in an Open Economy," American Economic Review, American Economic Association, vol. 106(3), pages 625-663, March.
    9. Siow, Aloysius & Zhu, Xiaodong, 1997. "The creation of plants and firms," Journal of Economic Dynamics and Control, Elsevier, vol. 22(1), pages 141-178, November.
    10. Cristiana Benedetti Fasil, 2009. "Product and Process Innovation in a Growth Model of Firm Selection," Economics Working Papers ECO2009/30, European University Institute.
    11. Eero Mäkynen & Oskari Vähämaa, 2021. "Uncertainty, Misallocation and the Life-cycle Growth of Firms," Discussion Papers 146, Aboa Centre for Economics.
    12. Roman Fossati, 2011. "Outsourcing versus Vertical Integration: A Dynamic Model of Industry Equilibrium," 2011 Meeting Papers 1421, Society for Economic Dynamics.
    13. Shuyun May Li, 2008. "Costly External Finance, Reallocation, and Aggregate Productivity," Department of Economics - Working Papers Series 1044, The University of Melbourne.
    14. Vincent Sterk & Petr Sedláček & Benjamin Pugsley, 2021. "The Nature of Firm Growth," American Economic Review, American Economic Association, vol. 111(2), pages 547-579, February.
    15. Costas Arkolakis, 2016. "A Unified Theory of Firm Selection and Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 131(1), pages 89-155.
    16. Jose Wynne, 2005. "The Value of Information in Credit Markets," 2005 Meeting Papers 228, Society for Economic Dynamics.
    17. Hugo A. Hopenhayn, 2011. "Firm Microstructure and Aggregate Productivity," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43(s1), pages 111-145, August.
    18. James R. Tybout, 2000. "Manufacturing Firms in Developing Countries: How Well Do They Do, and Why?," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 11-44, March.
    19. Eeckhout, Jan & De loecker, Jan & Mongey, Simon, 2021. "Quantifying Market Power And Business Dynamism In The Macroeconomy," CEPR Discussion Papers 16097, C.E.P.R. Discussion Papers.
    20. David Greenstreet, 2007. "Exploiting Sequential Learning to Estimate Establishment-Level Productivity Dynamics and Decision Rules," Economics Series Working Papers 345, University of Oxford, Department of Economics.

    More about this item

    Keywords

    ;
    ;
    ;

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:mcm:deptwp:2025-03. 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: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/demcmca.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.