Ownership Changes and Firm Dynamics

Bettina Bruggemann, Zachary L. Mahone and Thomas Palmer

Department of Economics Working Papers from McMaster University

Abstract: Ownership changes are common across firms of all sizes, and they have meaningful impacts on firm performance. Using a panel of Canadian administrative data we document that sales are an important margin in the firm life cycle, larger than exit rates for employer firms. Applying an event-study framework, we find that (a) survival rates initially decline post sale, leveling off after three years and (b) conditional on survival, profits are permanently higher. Embedding ownership changes in a model of firm dynamics, we find that 4.5% of entrants survive due to the option value of sale and that, within ten years from birth, 13% of dispersion in firm size is attributable to realized ownership changes. Moreover, ownership changes are particularly important for high productivity firms, accounting for one quarter of revenue concentration among the top 1% of businesses.

Keywords: Firm Dynamics; Ownership Changes; Firm Concentration (search for similar items in EconPapers)
JEL-codes: D22 E0 G30 L25 M13 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2025-03
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Persistent link: https://EconPapers.repec.org/RePEc:mcm:deptwp:2025-03

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