Acquisitions, Productivity, and Profitability: Evidence from the Japanese Cotton Spinning Industry

We explore how changes in ownership affect the productivity and profitability of producers. Using detailed data from the Japanese cotton spinning industry at the turn of the last century, we find that acquired firms' production facilities were not on average less physically productive than the...

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Bibliographic Details
Published in:The American economic review 2015-07, Vol.105 (7), p.2086-2119
Main Authors: Braguinsky, Serguey, Ohyama, Atsushi, Okazaki, Tetsuji, Syverson, Chad
Format: Article
Language:English
Subjects:
Acquisitions
Acquisitions & mergers
Business ownership
Capital costs
Cotton
Cotton industry
Demand side management
Economic models
Economic statistics
Economic theory
Incumbents
Industrial plants
Industrial productivity
Industry
Inventory
Japan
Ownership changes
Plants
Prices
Productivity
Profitability
Profitable firms
Spinning
Studies
Textile industry
Turnover
Uncertainty
Yarns
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Summary:We explore how changes in ownership affect the productivity and profitability of producers. Using detailed data from the Japanese cotton spinning industry at the turn of the last century, we find that acquired firms' production facilities were not on average less physically productive than the plants of the acquiring firms before acquisition. They were much less profitable, however, due to higher inventory levels and lower capacity utilization—differences that reflected problems in managing the uncertainties of demand. After acquisitions, less profitable acquired plants saw drops in inventories and gains in capacity utilization that raised both their productivity and profitability levels.
ISSN:0002-8282
1944-7981
DOI:10.1257/aer.20140150