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The Effects of M&A on Corporate Performance in Japan:DID Analysis in the Era of Corporate Governance Reform

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  • Fukuda, Akira

Abstract

This study analyzes how mergers and acquisitions (M&A) affect the performance of acquired companies in Japan. The sample period includes the era in which the government of Japan promoted a series of corporate governance reforms. A difference-in-differences analysis is implemented to eliminate the endogenous effects of a corporate acquisition. Choosing a control group by propensity score matching, we find that acquisitions have significantly negative effects on employment but no significant effects on labor productivity. For acquisitions by Japanese companies, we also find no significant improvement in ROA but significant improvement in Tobin’s q. The results are consistent with the zombie company theory, which indicates that an M&A prolongs the life of an insolvent company. Acquisitions by Japanese companies are in contrast with those by foreign companies, which have positive effects on ROA.

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  • 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).
    • Handle: RePEc:eee:japwor:v:55:y:2020:i:c:s0922142520300141
    DOI: 10.1016/j.japwor.2020.101013
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    More about this item

    Keywords

    M&A; Corporate governance; Zombie firms; Labor adjustment;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • J53 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Labor-Management Relations; Industrial Jurisprudence
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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