Exploring The Role Of Acquisition In The Performance Of Firms: Is The "Firm" The Right Unit Of Analysis?

Sang Nguyen and Robert H Mcguckin

Working Papers from U.S. Census Bureau, Center for Economic Studies

Abstract: In this article, we examine the effect of acquisitions on productivity performance of acquiring firms using the conventional regression analysis and a method of productivity decomposition. Our empirical work uses both plant- and firm-level data taken from the Longitudinal Research Database (LRD) on the entire population of U.S. food manufacturing firms that operated continuously during 1977-87. We find that (1) acquisitions had a significant, positive effect on acquiring firms' productivity growth, but this effect becomes insignificant when only firm-level data on multi-unit firms are included in the regressions; and (2) the decomposition results show that while the productivity contribution of the external component (acquired plants) is positive, the contribution of the internal component (existing plants) is negative; the two components offset each other leaving productivity of multi-unit acquiring firms virtually unchanged after acquisitions. These results suggest that assessing the impact of acquisitions on the structure and performance of firms requires a careful look at the individual components (i.e., plants) of the firms, particularly for large multi-unit firms.

Keywords: CES; economic; research; micro; data; microdata; chief; economist (search for similar items in EconPapers)
Date: 1995-11
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:cen:wpaper:95-13

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