IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/77764.html
   My bibliography  Save this paper

When Vultures Bring Blessings: Employment Growth in Japanese Businesses under Private Equity Ownership

Author

Listed:
  • Blind, Georg
  • Lottanti von Mandach, Stefania

Abstract

We track the effect of private equity ownership on employment in a methodological setup uniting descriptive analysis with checks for selection effects and causality. Applying this approach to buyout investments in Japan, we find evidence that employment grows significantly under private equity ownership, a finding that is in stark contrast with earlier studies on Anglo-Saxon economies; that the increase is not attributable to selection effects; and that growth rates during the holding period are significantly higher than under the previous ownership. We seek an explanation in the institutional setup and explore the relevance of reputation in transactions with revealed identities.

Suggested Citation

  • Blind, Georg & Lottanti von Mandach, Stefania, 2017. "When Vultures Bring Blessings: Employment Growth in Japanese Businesses under Private Equity Ownership," MPRA Paper 77764, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:77764
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/77764/1/MPRA_paper_77764.pdf
    File Function: original version
    Download Restriction: no

    File URL: https://mpra.ub.uni-muenchen.de/80811/1/MPRA_paper_80811.pdf
    File Function: revised version
    Download Restriction: no

    File URL: https://mpra.ub.uni-muenchen.de/80816/9/MPRA_paper_80816.pdf
    File Function: revised version
    Download Restriction: no

    File URL: https://mpra.ub.uni-muenchen.de/104155/1/MPRA_paper_104155.pdf
    File Function: revised version
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Georg D. BLIND & Stefania LOTTANTI VON MANDACH, 2015. "Decades not Lost, but Won: Increased Employment, Higher Wages, and More Equal Opportunities in the Japanese Labour Market," Social Science Japan Journal, University of Tokyo and Oxford University Press, vol. 18(1), pages 63-88.
    2. Hsu, Po-Hsuan & Lee, Hsiao-Hui & Liu, Alfred Zhu & Zhang, Zhipeng, 2015. "Corporate innovation, default risk, and bond pricing," Journal of Corporate Finance, Elsevier, vol. 35(C), pages 329-344.
    3. Nathusius, Eva & Achleitner, Ann-Kristin, 2009. "Angels or demons? Evidence on the impact of private equity firms on employment," CEFS Working Paper Series 2009-10, Technische Universität München (TUM), Center for Entrepreneurial and Financial Studies (CEFS).
    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. Jeffrey W. Allen & Gordon M. Phillips, 2000. "Corporate Equity Ownership, Strategic Alliances, and Product Market Relationships," Journal of Finance, American Finance Association, vol. 55(6), pages 2791-2815, December.
    6. Tim C. Opler, 1992. "Operating Performance in Leveraged Buyouts: Evidence From 1985 - 1989," Financial Management, Financial Management Association, vol. 21(1), Spring.
    7. 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.
    8. Suzanne Konzelmann & Neil Conway & Linda Trenberth & Frank Wilkinson, 2006. "Corporate Governance and Human Resource Management," British Journal of Industrial Relations, London School of Economics, vol. 44(3), pages 541-567, September.
    9. 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.
    10. Kaplan, Steven, 1989. "The effects of management buyouts on operating performance and value," Journal of Financial Economics, Elsevier, vol. 24(2), pages 217-254.
    11. Hans Bruining & Ernst Verwaal & Mike Wright, 2013. "Private equity and entrepreneurial management in management buy-outs," Small Business Economics, Springer, vol. 40(3), pages 591-605, April.
    12. 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.
    13. Abe, Naohito & Shimizutani, Satoshi, 2007. "Employment policy and corporate governance-- An empirical comparison of the stakeholder and the profit-maximization model," Journal of Comparative Economics, Elsevier, vol. 35(2), pages 346-368, June.
    14. Fukuda, Shin-ichi & Kasuya, Munehisa & Nakajima, Jouchi, 2018. "The role of corporate governance in Japanese unlisted companies," Japan and the World Economy, Elsevier, vol. 47(C), pages 27-39.
    15. Charles W. L. Hill, 1995. "National Institutional Structures, Transaction Cost Economizing and Competitive Advantage: The Case of Japan," Organization Science, INFORMS, vol. 6(1), pages 119-131, February.
    16. 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.
    17. Masahiro Okuno‐Fujiwara, 2002. "Social Relations and Endogenous Culture," The Japanese Economic Review, Japanese Economic Association, vol. 53(1), pages 1-24, March.
    18. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2006. "Does Culture Affect Economic Outcomes?," Journal of Economic Perspectives, American Economic Association, vol. 20(2), pages 23-48, Spring.
    19. Gregory Jackson, 2005. "Stakeholders under Pressure: corporate governance and labour management in Germany and Japan," Corporate Governance: An International Review, Wiley Blackwell, vol. 13(3), pages 419-428, May.
    20. Dirk Engel & Joel Stiebale, 2014. "Private equity, investment and financial constraints: firm-level evidence for France and the United Kingdom," Small Business Economics, Springer, vol. 43(1), pages 197-212, June.
    21. Noda, Tomohiko & Hirano, Daisuke, 2013. "Enterprise unions and downsizing in Japan before and after 1997," Journal of the Japanese and International Economies, Elsevier, vol. 28(C), pages 91-118.
    22. Nicolas Bacon & Mike Wright & Natalia Demina, 2004. "Management Buyouts and Human Resource Management," British Journal of Industrial Relations, London School of Economics, vol. 42(2), pages 325-347, June.
    23. Grant Fleming, 2018. "Corporate Restructuring and Leveraged Buyouts in the Asia Pacific 1980–2010," Australian Economic History Review, Economic History Society of Australia and New Zealand, vol. 58(3), pages 283-314, November.
    24. Williams, Michael A. & Pinto, Brijesh P. & Park, David, 2015. "Global evidence on the distribution of firm growth rates," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 432(C), pages 102-107.
    25. 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.
    26. Richard Harris & Donald S. Siegel & Mike Wright, 2005. "Assessing the Impact of Management Buyouts on Economic Efficiency: Plant-Level Evidence from the United Kingdom," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 148-153, February.
    27. Kevin Amess & Mike Wright, 2012. "Leveraged buyouts, private equity and jobs," Small Business Economics, Springer, vol. 38(4), pages 419-430, May.
    28. Lichtenberg, Frank R & Siegel, Donald, 1990. "The Effect of Ownership Changes on the Employment and Wages of Central Office and Other Personnel," Journal of Law and Economics, University of Chicago Press, vol. 33(2), pages 383-408, October.
    29. 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.
    30. Tsung-ming Yeh, 2012. "Do Private Equity Funds Increase Firm Value? Evidence from Japanese Leveraged Buyouts," Journal of Applied Corporate Finance, Morgan Stanley, vol. 24(4), pages 112-128, December.
    31. Smith, Abbie J., 1990. "Corporate ownership structure and performance *1: The case of management buyouts," Journal of Financial Economics, Elsevier, vol. 27(1), pages 143-164, September.
    32. Scott Schaefer, 1998. "Influence Costs, Structural Inertia, and Organizational Change," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 7(2), pages 237-263, June.
    33. 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).
    34. Nick Bacon & Mike Wright & Miguel Meuleman & Louise Scholes, 2012. "The Impact of Private Equity on Management Practices in European Buy-outs: Short-termism, Anglo-Saxon, or Host Country Effects?," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 51, pages 605-626, April.
    35. Mingo, Santiago & Junkunc, Marc & Morales, Francisco, 2018. "The interplay between home and host country institutions in an emerging market context: Private equity in Latin America," Journal of World Business, Elsevier, vol. 53(5), pages 653-667.
    36. Aviad Pe'Er & Oliver Gottschlag, 2011. "Red and Blue: the relationship between the institutional context and the performance of leveraged buyout investments," Post-Print hal-00631579, HAL.
    37. Muscarella, Chris J & Vetsuypens, Michael R, 1990. "Efficiency and Organizational Structure: A Study of Reverse LBOs," Journal of Finance, American Finance Association, vol. 45(5), pages 1389-1413, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Georg D. Blind & Stefania Lottanti von Mandach, 2021. "Of pride and prejudice: agent learning under sticky and persistent stereotype," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 16(2), pages 381-410, April.

    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. Tåg, Joacim, 2010. "The Real Effects of Private Equity Buyouts," Working Paper Series 851, Research Institute of Industrial Economics.
    2. Renneboog, Luc & Vansteenkiste, Cara, 2017. "Leveraged Buyouts : A Survey of the Literature," Discussion Paper 2017-015, Tilburg University, Center for Economic Research.
    3. 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).
    4. 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.
    5. 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.
    6. Scellato, Giuseppe & Ughetto, Elisa, 2013. "Real effects of private equity investments: Evidence from European buyouts," Journal of Business Research, Elsevier, vol. 66(12), pages 2642-2649.
    7. Aurélie Sannajust & Alexander Groh, 2023. "Pioneering management buy-out and entrepreneurial finance research: Mike Wright’s research legacy," Small Business Economics, Springer, vol. 60(1), pages 1-35, January.
    8. Erich Battistin & Paolo Bortoluzzi & Fabio Buttignon & Martina Serafini & Marco Vedovato, 2013. "The Effects of Private Equity on Targets: Majority versus Minority Investments," "Marco Fanno" Working Papers 0167, Dipartimento di Scienze Economiche "Marco Fanno".
    9. Charlie Weir & Peter Jones & Mike Wright, 2015. "Public to private transactions, private equity and financial health in the UK: an empirical analysis of the impact of going private," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 19(1), pages 91-112, February.
    10. Steven Davis & John Haltiwanger & Ron Jarmin & Josh Lerner & Javier Miranda, 2008. "Private Equity and Employment," Working Papers 08-07, Center for Economic Studies, U.S. Census Bureau, revised Oct 2011.
    11. Viral V. Acharya & Oliver F. Gottschalg & Moritz Hahn & Conor Kehoe, 2013. "Corporate Governance and Value Creation: Evidence from Private Equity," The Review of Financial Studies, Society for Financial Studies, vol. 26(2), pages 368-402.
    12. Nikoskelainen, Erkki & Wright, Mike, 2007. "The impact of corporate governance mechanisms on value increase in leveraged buyouts," Journal of Corporate Finance, Elsevier, vol. 13(4), pages 511-537, September.
    13. Steven N. Kaplan & Per Stromberg, 2009. "Leveraged Buyouts and Private Equity," Journal of Economic Perspectives, American Economic Association, vol. 23(1), pages 121-146, Winter.
    14. Kevin Amess & Mike Wright, 2012. "Leveraged buyouts, private equity and jobs," Small Business Economics, Springer, vol. 38(4), pages 419-430, May.
    15. Phillip Leslie & Paul Oyer, 2008. "Managerial Incentives and Value Creation: Evidence from Private Equity," NBER Working Papers 14331, National Bureau of Economic Research, Inc.
    16. Nick Bacon & Kim Hoque & Mike Wright, 2019. "Is Job Insecurity Higher in Leveraged Buyouts?," British Journal of Industrial Relations, London School of Economics, vol. 57(3), pages 479-512, September.
    17. 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.
    18. L. Goossens & S. Manigart & M. Meuleman, 2007. "The Change In Ownership After A Buyout: Impact On Performance," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 07/484, Ghent University, Faculty of Economics and Business Administration.
    19. Benjamin Hammer & Heiko Hinrichs & Bernhard Schwetzler, 2018. "Does culture affect the performance of private equity buyouts?," Journal of Business Economics, Springer, vol. 88(3), pages 393-469, May.
    20. Steven Davis & John Haltiwanger & Ron Jarmin & Josh Lerner & Javier Miranda, 2008. "Private Equity and Employment," Working Papers 08-07r, Center for Economic Studies, U.S. Census Bureau, revised Oct 2011.

    More about this item

    Keywords

    employment adjustments; private equity; buyout investments; Japan;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions

    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:pra:mprapa:77764. 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: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.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.