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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
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    File URL: http://socialsciences.mcmaster.ca/econ/rsrch/papers/archive/2025-03.pdf
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    More about this item

    Keywords

    Firm Dynamics; Ownership Changes; Firm Concentration;
    All these 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

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