Understanding the M&A boom in Japan: What drives Japanese M&A?

Yasuhiro Arikawa and Hideaki Miyajima

Discussion papers from Research Institute of Economy, Trade and Industry (RIETI)

Abstract: In this paper, we examine the causes of the first merger boom since the late 1990s in Japan. Using industry-level data, we show that mergers and acquisitions (M&As) are driven mainly by economic shocks. While industries with higher growth opportunities are likely to have more M&A activity, industries facing negative fundamental shocks, such as rapid sales declines, also experience larger M&A deals. These results suggest that the recent merger wave in Japan is mainly explained by the neoclassical model. At the firm level, we find that the bidder is the firm with the higher growth opportunity, and the target is the one with the lower growth opportunity. This means that Japanese firms improved their efficiency through merger activity since the 1990s. Lastly, we find that internal funds for the acquiring firm play a very important role in bidding activity, while a high probability of being targeted for M&A is associated with high leverage.

Pages: 38 pages
Date: 2007-06
New Economics Papers: this item is included in nep-bec, nep-com and nep-ind
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eti:dpaper:07042

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