Analysing the employment effects of mergers and acquisitions

This paper examines the employment effects of mergers and acquisitions (M&As) by using matched establishment-level data from Finland. Our data register practically almost all M&As in all sectors. We compare the employment effects of cross-border M&As with the effects arising from two different types of domestic M&As and internal restructurings. The results show that cross-border M&As lead to downsizing in manufacturing employment. The effects of cross-border M&As on employment in non-manufacturing are much weaker. Changes in ownership associated with domestic M&As and internal restructurings also typically cause employment losses, but they exhibit an interesting sectoral variation.     

Pre-empting technology competition through firm acquisitions

This paper shows that firms engage in horizontal mergers and acquisitions to pre-empt competition in technology markets. Making use of the patent application procedure at the European Patent Office we introduce a measure for potential entry barriers in technology markets.     

Globalization and profitability of cross-border mergers and acquisitions

This paper studies how the surplus generated by the globalization process is divided between MNEs and owners of domestic assets. We construct an oligopoly model where the equilibrium acquisition pattern, the acquisition price and firms’ greenfield investments are endogenously determined. Acquisition entry is shown to be more likely when the complementarity between domestic and foreign assets is high. However, we show that such acquisitions might have a low profitability, since the bidding competition over the domestic assets is then so fierce that the firms involved would be better off not starting a bidding war. Risks associated with different entry modes are also examined.     

The industry life-cycle of the size distribution of firms

This paper analyzes the evolution of the distributions of output and employment across firms in U.S. manufacturing industries from 1963 until 1997. The firm size distribution changes significantly as an industry goes through stages of its life-cycle. The evolutions of the employment and output distributions also differ significantly, but display strong inter-industry regularities, including that the nature of the evolution depends on whether the industry is experiencing growth, shakeout, maturity, or decline. The observed patterns have implications for theories of industry dynamics and evolution.     

企业并购能否抑制经济“脱实向虚”——基于产业优化发展的视角

近年来,我国经济面临着严峻的“脱实向虚”问题,微观层面表现为实体企业金融化现象日益凸显,不仅影响我国经济的高质量发展,而且导致金融领域的风险集聚。因此如何抑制经济“脱实向虚”一直受到社会各界的广泛关注。本文以2009—2018年中国沪深A股非金融类、非房地产类上市公司为样本,采用倾向性得分匹配双重差分法,从产业优化发展的视角出发,实证检验企业并购对实体企业金融化的抑制影响及作用机制,并采用三重差分法检验境内并购和海外并购对于实体企业金融化抑制作用的差异。研究发现：企业并购对于企业的短期金融化行为和长期金融化行为均有抑制作用,且海外并购的抑制作用更强;境内并购主要通过“规模经济和范围经济效应”和“产业链协同互补效应”抑制企业金融化,海外并购主要通过“产业链协同互补效应”和“技术协同效应”抑制企业金融化。本文研究表明企业并购可以通过促进产业的健康可持续发展,提升产业对资本的吸引力,从而从根本上治理经济“脱实向虚”问题。     

The nonlinear effects of firm size on innovation: an empirical investigation

ABSTRACT

In conventional studies, large firms tend to emphasize more on process innovation than product innovation. This paper explores factors that could indicate a distinct pattern of firms’ innovation-size relationship: threshold size that implies a positive effect of firm size on the probability of product innovation success; cannibalization effect that creates incentives for large firms to favor product innovations; and financial constraints that have differential effects given different firm sizes. A hypothesis about a non-monotonic relationship between the proportion of product innovation and firm size is tested with nonlinear and dynamic econometric models. For the large firms, empirical evidence shows product innovations result in an overall larger share of new products in total sales, relative to existing products in which process innovations are rooted.     

Economic policy uncertainty and mergers and acquisitions: Evidence from China

This study examines the relationship between economic policy uncertainty and mergers and acquisitions (M&As) in China. Using all listed Chinese companies on the Shanghai and Shenzhen Stock Exchanges as well as 4188 ​M&A deals from the period of 2001–2018, we show that Chinese firms are more likely to make acquisitions during periods of high economic policy uncertainty, which contradicts the behavior of US firms. We further show that state-owned enterprises (SOEs) are less likely than non-SOEs to make acquisitions during periods of high economic policy uncertainty. SOEs are less likely to use only cash for their acquisitions during periods of high economic policy uncertainty. These results indicate the prudence of SOEs regarding acquisitions relative to non-SOEs during periods of high economic policy uncertainty. Moreover, acquisitions during periods of high economic policy uncertainty are associated with an increase in shareholder wealth for acquirers, and this wealth effect is more pronounced for SOEs.     

The effect of heterogeneous beliefs on mergers and acquisitions

This article investigates the effect of heterogeneous beliefs on firms’ mergers and acquisitions (M&A) decisions. Using data of China’s financial market, which is featured with great heterogeneity of belief, we find that heterogeneous beliefs are positively associated with the occurrence of M&A transactions, and firms with greater heterogeneous beliefs are more likely to pay the transactions with stock. Moreover, we show that government intervention, measured by state ownership, weakens the effect of heterogeneous beliefs on firms’ M&A decisions.     

Entry,growth, and survival: The new learning on firm selection and industry evolution

This paper tries to shed some light on the seeming paradox posed by the findings in the industrial organization literature that (1) the bulk of firms in an industry are not only very small, but also sufficiently small so that they are operating at a sub-optimal scale of output, and (2) entrepreneurs are apparently not deterred from starting new firms even in industries where scale economies play an important role. A dynamic view of the process of firm selection and industry evolution is that new firms typically start at a very smal scale of output. Because this level of output may be sub-optimal, the firm must grow in order to survive. The empirical evidence supports such a dynamic view of the evolutionary nature of industries. Viewed through a dynamic lens, the often-observed asymmetric size distribution of firms becomes more understandable. The persistence of an asymmetric firm-size distribution skewed towards small enterprises presumably reflects a continuing process of entry into industries and not necessarily the survival of such small and suboptimal enterprises over a long period of time.     

The formal sector wage premium and firm size

We show theoretically that when larger firms pay higher wages and are more likely to be caught defaulting on labor taxes, then large-high wage firms will be in the formal and small-low wage firms will be in the informal sector. The formal sector wage premium is thus just a firm size wage differential. Using data from Ecuador we illustrate that firm size is indeed the key variable determining whether a formal sector premium exists.     

Mergers and acquisitions as a response to the deregulation of the electric power industry: value creation or value destruction?

Many electric utilities, as a response to the deregulation of the electric power industry, adopted a strategy of acquiring other electric or gas utilities. We examine whether these merger and acquisition strategies create value for the utility shareholders and whether the strategies result in superior post-merger operating and stock-price performance relative to utilities that did not grow through acquisitions. We find little evidence that the mergers and acquisitions created long-term value for a fully diversified investor. Furthermore, the stock price and operating performance of the acquirers under performed the stock price and operating performance of a control portfolio of utilities that did not engage in merger activity.      

过度自信理论在中国公司并购中的应用——文献综述与评述

心理学家们发现公司管理者存在过度自信的心理特征,并且这种心理特征在公司并购决策中常具有一定的影响力。首先,过度自信这一心理特征普遍存在于公司管理者之中。其次,通过对国内外相关文献的总结,分析了过度自信理论在中国公司并购中应用的现状与特点,并且认为在中国运用过度自信理论解释公司并购活动是必要的。最后,提出了今后的研究思路、研究方法和研究难点,希望为今后研究中国公司并购活动提供理论指导。     

Cournot competition and endogenous firm size

The paper studies the dynamics of firm size in a repeated Cournot game with unknown demand function. We model the firm as a type of artificial neural network. Each period it must learn to map environmental signals to both a demand parameter and its rival’s output choice. However, this learning game is in the background, as we focus on the endogenous adjustment of network size. We investigate the long-run evolution of firm/network size as a function of profits, rival’s size, and the type of adjustment rules used.

Defying gravity: The determinants of China's outbound mergers and acquisitions

We find that the determinants of China's outbound M&As depart dramatically from the literature. First, China's M&A volume with a target country is not affected by geographic distance, currency appreciation, or stock market return. Second, Chinese acquirers pick an unconventional uphill battle by primarily targeting countries with greater cultural distance, stronger investor protection laws, and higher per capita income. We also document that China's outbound M&As have a higher than normal percentage of deals being partial acquisitions. We argue that emerging markets can differ remarkably from developed countries in the considerations and modes of outbound M&As.     

Acquiring nanotechnology capabilities: role of mergers and acquisitions

Mergers and acquisitions (M&As) are an important but unstudied aspect of nanotechnology's evolution. This paper uses case review and bibliometric analysis to examine 20 M&As involving acquired firms in the nanotechnology domain. The guiding proposition is that acquired firms provide complementarities to the acquiring firms. Key measures given consideration include the nature of the post-acquisition organisation, whether the pre-acquisition geographic location is retained, the purpose of the acquisitions as indicated in news releases, and the extent of similarity in research publications and patents. Differences by the country of the acquiring firm and sub-industry are noted. Within the limitations of the case study approach, the results suggest that acquired firms in the nanotechnology domain provide complementary capabilities to their acquirers.     

我国大型企业海外并购的困境和出路探索

随着我国综合国力的增强,大型企业逐步走出国门实施海外并购。但由于多种原因,我国不少大型企业海外并购陷入困境并屡屡遭受重大损失。深入剖析我国大型企业海外并购陷入困境或遭受重大损失的原因,探索并尽快找到行之有效的解决办法,提高海外并购的绩效和成功率,尽快摆脱困境并走上健康发展轨道,已刻不容缓。     

The impact of mergers on acquiring firm shareholder wealth: The 1905–1930 experience

From the standpoint of investors successful acquisitions increase profitability and stock Contemporary studies find acquiring firm shareholders earning small gains before and large losses after consolidation. Using modern financial market procedures, we examine a portfolio of 191 acquiring firms from 1905 to 1930 to determine the impact on firm owners of early industrial acquisitions in the United States and the effect of institutional changes on takeover gains. Acquisitions from 1905 to 1930 raised shareholder wealth by more than 3 percent, an increase exceeding gains from more recent mergers. Stock price continued to rise after completion for acquisitions before World War I, but fell dramatically for acquisitions during the oligopoly merger wave of the late 1920s.We would like to thank Patrick Byrne and Tara Nussman for help in collecting the financial data, Ralph Nelson for permitting us to use his and Carl Eis's worksheets on merger activity from 1905 to 1930, and George Bittlingmayer, Malcolm Burns, David Gulley, Stephen Grubaugh, Lori Leeth, John Matsusaka, Dennis Mueller, Rexford Santerre, Scott Sumner, Tugrul Temel, and Nikhil Varaiya for their helpful comments.     

Fractional integration and cointegration in merger and acquisitions in the US petroleum industry

This article employs methodologies based on fractional integration and cointegration to analyse the time-series properties of merger and acquisitions (M&A) activity and crude oil prices in the US from 1980 to 2012. Our results indicate that an increase in the crude oil price produces a significant increase in the M&A data between 2 and 3 months after the initial shock.     

Import to invest: Impact of cultural goods on cross-border mergers and acquisitions

Existing studies have demonstrated the necessities of formal institutions and negativity of cultural distance in international investments. Surprisingly, China’s exponential increase of cross-border mergers and acquisitions (M&As) and its low-quality institutions and distinct cultural norms contradict these studies. This paper aims to tackle this puzzle by examining the role of cultural imports in cross-border M&As. Our empirical evidence suggests that the trade of cultural goods significantly increases the volume and realized economic gains of M&As from importing to exporting countries. Our results are robust to alternative measures and an instrumental variable approach. On exploring potential channels, we find that imported cultural goods could drive cultural convergence between countries and also mitigate the adverse effect of cultural distance on merger outcomes. We further show that cultural imports could help firms in overcoming contractual barriers at target countries. This paper provides practical implications for cross-border investments in the current world with intensified cultural conflicts.     

The distributional effects of selection and capital accumulation on firm productivity under imperfect capital markets

In this evolutionary model, random shocks create differences in the rate of return on capital, while individual saving and investment behavior can reduce these differences over time. Firms with either low total factor productivity (TFP) or a low average return on capital are selected for exit, and new firms enter to take their place. As would be expected, a higher turnover rate improves TFP and reduces its variation. While we show that a higher turnover rate would result in a more positively skewed TFP distribution if exit selection is based directly upon TFP, we find that when we select firms for exit based on their average product of capital, the marginal impact of a higher turnover rate is to more negatively skew the TFP distribution. Overall, our simulations highlight the importance of considering the role selection may play in shaping the distribution of productivity when econometricians seek estimates of firm inefficiency.