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

Serguey Braguinsky (), Atsushi Ohyama, Tetsuji Okazaki and Chad Syverson
Additional contact information
Tetsuji Okazaki: Faculty of Economics, The University of Tokyo

No CIRJE-F-945, CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo

Abstract: We explore how changes in ownership and managerial control affect the productivity and profitability of producers. Using detailed operational, financial, management, and ownership data from the Japanese cotton spinning industry at the turn of the last century, we find a more nuanced picture than the straightforward "higher productivity buys lower productivity" story commonly appealed to in the literature. Acquired firms' production facilities were not on average any less physically productive than the plants of the acquiring firms before acquisition, conditional on operating. They were much less profitable , however, due to consistently higher inventory levels and lower capacity utilization—differences which reflected problems in managing the inherent uncertainties of demand in the industry. When these less profitable plants were purchased by more profitable establishments, the acquired plants saw drops in inventories and gains in capacity utilization that raised both their productivity and profitability levels, consistent with acquiring owner/managers spreading their better demand management abilities across the acquired capital.

Pages: 69 pages
Date: 2014-10
New Economics Papers: this item is included in nep-bec, nep-eff and nep-his
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http://www.cirje.e.u-tokyo.ac.jp/research/dp/2014/2014cf945.pdf (application/pdf)

Related works:
Journal Article: Acquisitions, Productivity, and Profitability: Evidence from the Japanese Cotton Spinning Industry (2015) Downloads
Working Paper: Acquisitions, productivity, and profitability: Evidence from the Japanese cotton spinning industry (2014) Downloads
Working Paper: Acquisitions, Productivity, and Profitability: Evidence from the Japanese Cotton Spinning Industry (2014) Downloads
Working Paper: Acquisitions, Productivity, and Profitability: Evidence from the Japanese Cotton Spinning Industry (2014) Downloads
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