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Productivity, restructuring, and the gains from takeovers
This paper investigates how takeovers create value. Using plant-level data, I show that acquirers increase targets' productivity through more efficient use of capital and labor. Acquirers reduce capital expenditures, wages, and employment in target plants, though output is unchanged. Acquirers improve targets' investment efficiency through reallocating capital to industries with better investment opportunities. Moreover, changes in productivity help explain the merging firms' announcement returns. The combined announcement returns are driven by improvements in target's productivity. Targets with greater productivity improvements receive higher premiums. These results provide some first empirical evidence on the relation between productivity and stock returns in takeovers.
History
Journal
Journal of financial economicsVolume
109Issue
1Pagination
250 - 271Publisher
ElsevierLocation
Amsterdam, The NetherlandsPublisher DOI
ISSN
0304-405XLanguage
engPublication classification
C1.1 Refereed article in a scholarly journalCopyright notice
2013, Elsevier B.V.Usage metrics
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