Deakin University
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Productivity, restructuring, and the gains from takeovers

journal contribution
posted on 2013-07-01, 00:00 authored by Xiaoyang LiXiaoyang Li
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 economics

Volume

109

Pagination

250-271

Location

Amsterdam, The Netherlands

ISSN

0304-405X

Language

eng

Publication classification

C1.1 Refereed article in a scholarly journal

Copyright notice

2013, Elsevier B.V.

Issue

1

Publisher

Elsevier