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Exploring The Role Of Acquisition In The Performance Of Firms: Is The "Firm" The Right Unit Of Analysis?

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  • Sang V Nguyen
  • Robert H Mcguckin

Abstract

In this article, we examine the effect of acquisitions on productivity performance of acquiring firms using the conventional regression analysis and a method of productivity decomposition. Our empirical work uses both plant- and firm-level data taken from the Longitudinal Research Database (LRD) on the entire population of U.S. food manufacturing firms that operated continuously during 1977-87. We find that (1) acquisitions had a significant, positive effect on acquiring firms' productivity growth, but this effect becomes insignificant when only firm-level data on multi-unit firms are included in the regressions; and (2) the decomposition results show that while the productivity contribution of the external component (acquired plants) is positive, the contribution of the internal component (existing plants) is negative; the two components offset each other leaving productivity of multi-unit acquiring firms virtually unchanged after acquisitions. These results suggest that assessing the impact of acquisitions on the structure and performance of firms requires a careful look at the individual components (i.e., plants) of the firms, particularly for large multi-unit firms.

Suggested Citation

  • Sang V Nguyen & Robert H Mcguckin, 1995. "Exploring The Role Of Acquisition In The Performance Of Firms: Is The "Firm" The Right Unit Of Analysis?," Working Papers 95-13, Center for Economic Studies, U.S. Census Bureau.
    • Handle: RePEc:cen:wpaper:95-13
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    1. Sang V. Nguyen & Michael Ollinger, 2009. "Mergers and acquisitions, employment, wages, and plant closures in the U.S. meat product industries," Agribusiness, John Wiley & Sons, Ltd., vol. 25(1), pages 70-89.

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