Do Mergers and Acquisitions Improve Efficiency? Evidence from Power Plants

Mert Demirer and Omer Karaduman
Additional contact information
Mert Demirer: MIT
Omer Karaduman: Stanford U

Research Papers from Stanford University, Graduate School of Business

Abstract: Using rich data on hourly physical productivity and thousands of ownership changes from U.S. power plants, we study the effects of acquisitions on efficiency and underlying mechanisms. We find a 2% average increase in efficiency for acquired plants, beginning five months after acquisitions. Efficiency gains rise to 5% under direct ownership changes, with no significant change when only parent ownership changes. Investigating the mechanisms, three-quarters of the efficiency gain is attributed to increased productive efficiency, while the rest comes from dynamic efficiency through changes in production allocation. Our evidence suggests that high-productivity firms buy underperforming assets from low-productivity firms and make them as productive as their existing assets through operational improvements. Finally, acquired plants improve their performance beyond efficiency by increasing output and reducing outages.

JEL-codes: G34 L22 L25 L40 (search for similar items in EconPapers)
Date: 2024-07
New Economics Papers: this item is included in nep-cfn, nep-com, nep-eff, nep-ene, nep-ind and nep-reg
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.gsb.stanford.edu/faculty-research/work ... vidence-power-plants

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ecl:stabus:4209

Access Statistics for this paper

More papers in Research Papers from Stanford University, Graduate School of Business Contact information at EDIRC.
Bibliographic data for series maintained by ().