The impacts of M&A on employment and labor productivity in Japan

Taguchi, Hiroyuki (2013): The impacts of M&A on employment and labor productivity in Japan. Published in: Mergers and Acquisitions: Practices, Performance and Perspectives (January 2013): pp. 161-178.

Abstract

Whether the active M&A in Japan has brought about positive or negative impacts on the volume of employment is not only the concern of each firm, but also the center of national interests in the context of national industrial policies. M&A activities, however, vary in terms of micro behavior of each firm such as motivation, management and organization as well as of the industrial category that each firm belongs to, and the employment consequences may differ depending on the types of firms’ micro behavior and the industrial sectors. This chapter tried to come up with some aggregated consequences of M&A in Japan on employment volume on empirical bases, by the M&A categories in which we take firms’ behaviors and industrial sectors into consideration to maximum extent. To be specific, we examined employment-effects of M&A in Japan by the deal type (merger and acquisition) and by the sector (manufacturing and non-manufacturing), tracing the effects in the long term, using large dataset with 9,880 sample firms and 2,530 M&A cases for the period from 1995 to 2008. Our main findings were: the “acquisition” with the key role of “extension and growth” proved to have positive effects in the dynamic terms on target firms’ employment, mainly in manufacturing sector with high labor productivity. On the other hand, the “merger” with key function of “consolidation” turned out to have negative impacts dynamically on post-merger firms’ employment, mainly in non-manufacturing sector with low labor productivity. The strategic implication might to be that the different employment responses to M&A events between manufacturing and non-manufacturing reflect the difference in labor productivity between them, i.e. the dual structure of Japanese economy.

• Item Type: MPRA Paper
• Language: English
• Keywords: M&A, acquisition, merger, dynamic employment effects
• Subjects: D - Microeconomics > D2 - Production and Organizations > D21 - Firm Behavior: Theory; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M5 - Personnel Economics > M51 - Firm Employment Decisions ; Promotions

References

Arellano, Manuel, and Bover, Olympia. (1995). Another look at the instrumental variable estimation of error-components models, Journal of Econometrics, 68(1), pp. 29-51.

Arikawa, Yasuhiro, and Miyajima, Hideki. (2007). Understanding the M&A boom in Japan: What drives Japanese M&A, REITI Discussion Paper Series, 07-E-042.

Blundell, Richard, and Bond, Stephen. (1998). Initial conditions and moment restrictions in dynamic panel data models, Journal of Econometrics, 87(1), pp. 115-143.

Bresson, Georges, Kramarz, Francis, and Sevestre, Patrick. (1996). Dynamic labour demand models. In: Matyas, L., Sevestre, P. (Eds), The Econometrics of Panel Data: Handbook of Theory and Applications. Kluwer Academic Publishers, Dordrecht.

Conyon, Martin J., Girma, S., Thompson, S., and Wright, P. W.. (2002). The impact of mergers and acquisitions on company employment in the United Kingdom, European Economic Review 46, pp. 31-49.

Gugler, Klaus, and Yurtoglu, B. Burcin. (2004). The effects of mergers on company employment in the USA and Europe, International Journal of Industrial Organization 22, pp. 481-502.

Harford, Jarrad. (2005). What Drives Merger Waves?, Journal of Financial Economics, 77, pp. 529-560.

Kubo, Katsuyuki, and Saito, Takuji. (2007). Is the Treatment of Employees Deteriorated? – M&A and Employment adjustment, in: Miyajima, Hideaki (eds), M&A in Japan: The Impact on Corporate Governance, Organizational Efficiency and Firm Value, pp. 175-196, (Japanese: Toyo Keizai Inc.). McKinsey Global Institute. (2000). Why the Japanese Economy is not Growing, http://www.mckinsey.com/mgi/reports/pdfs/japan/japan.pdf.

Miyajima, Hideki. (2007a). How do we understand the increase of M&A in Japan, in: Miyajima, Hideaki (eds), M&A in Japan: The impacts on corporate governance, organizational efficiency and firm value, pp. 1-41, (Japanese: Toyo Keizai Inc.).

Miyajima, Hideki. (2007b). The features and functions of M&A in Japan, in: Miyajima, Hideaki (eds), M&A in Japan: The impacts on corporate governance, organizational efficiency and firm value, pp. 331-379, (Japanese: Toyo Keizai Inc.).

Nickell, Stephen. (1984). An investigation of the determinants of manufacturing employment in the United Kingdom. Review of Economic Studies 51(4), pp. 529-557.