Abstract
This study examines whether merger performance is different between member companies of a Japanese business group (keiretsu) and independent companies. The six largest keiretsu groups with a long history are the focus (Mitsubishi, Mitsui, Sumitomo, Fuyo, Sanwa, and Daiichi Kangyo). Using data on mergers between Japanese-listed companies for 1985–2014, this study investigates the role of keiretsu groups on post-merger performance including company stock price, number of employees, and research and development. The event study shows that the stock prices of acquirers react less positively to announcements for within-group mergers than for mergers between independent firms. In addition, acquirers of within-group mergers tend to increase the number of employees and average annual salary but decrease the ratio of research and development after mergers. Such reduced ratio of research and development is not observed for acquirers of other types of mergers. In addition, the targets of within-group mergers tend to have higher leverage than other targets. Our results indicate that within-group mergers do not seem to aim at enhancing economic performance of acquirers but rather at rescuing troubled targets and are, thus, perceived unfavorably by market participants.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
Notes
As Higgins (2018) stated, business groups are prevalent around the world, and banks tend to be at the center of them. For example, dominant business groups exist in China, Hong Kong, South Korea, India, Indonesia, the Philippines, Taiwan and Thailand.
Consolidated accounting means to agglomerate the financial results of the subsidiary companies into the parent company’s financial statement.
References
Alexandridis, G., Petmezas, D., & Travlos, N. G. (2010). Gains from mergers and acquisitions around the world: New evidence. Financial Management, 39(4), 1671–1695.
Andrade, G., Mitchell, M., & Stafford, E. (2001). New evidence and perspective on mergers. Journal of Economics Perspectives, 15(2), 1–36.
Arikawa, Y., & Miyajima, H. (2007). Understanding the M&A boom in Japan: What drives Japanese M&A? RIETI Discussion Paper Series, 07-E-042. https://www.rieti.go.jp/jp/publications/summary/07060005.html. Accessed on 10 March 2019.
Bertrand, O., & Zuniga, P. (2006). R&D and M&a: Are cross-border M&a different? An investigation on OECD countries. International Journal of Industrial Organization, 24, 401–423.
Cassiman, B., Colombo, M., Garrone, P., & Veugelers, R. (2005). The impact of impact of M&a on the R&D process: An empirical analysis of the role of technological and market relatedness. Research Policy, 34(2), 195–220.
Flath, D. (2014). The Japanese economy (3rd ed.). UK: Oxford University Press.
Flath, D. (1993). Shareholding in the keiretsu, Japan's financial groups. The Review of Economics and Statistics, 75(2), 249–257.
Higgins, H. N. (2018). Banks and corporate decisions: Evidence from business groups. Financial Management, 47(3), 679–713.
Hitt, M. A., Hoskisson, R. E., Ireland, R. D., & Harrison, J. S. (1991). Effects of acquisitions on R&D inputs and outputs. Academy of Management Journal, 34(3), 693–706.
Hoshi, T., & Kashyap, A. K. (2001). Corporate financing and governance in Japan: The road to the future. USA: The MIT Press.
Inoue, K., & Kato, H., (2006). M&A to Kabuka (M&A and stock prices) Toyo Keizai Shinposha: Japan (in Japanese).
Kubo, K., & Saito, T. (2007). Gappei/Baishu to Jugyoin no Chingin (M&a and employees’ wages). Nihon Roudou Kenkyu Zasshi, 560, 4–15 (in Japanese).
Mehrotra, V., Schaik, D., Spronk, J., & Steenbeek, O. (2011). Creditor-focused corporate governance: Evidence from mergers and Acquisition in Japan. Journal of Finance and Quantitative Analysis, 46(4), 1051–1072.
Miyajima, H. (2007). Nihon no M&A: Kigyo Touchi/Soshiki Kouritsu/Kigyo Kachi heno impakuto (Japanese M&A: The impact on corporate governance, organizational efficiency, and firm value). Toyo Keizai Shinposha: Japan (in Japanese).
Nakatani, I. (1983). Kigyo Shudan no Keizaiteki Imi to Ginko no Yakuwari (economic significance of business groups and the role of banks). Kin-yu Keizai (Journal of Financial Economics), 202, 51–75 (in Japanese).
Taguchi, H., Yanagawa, T., & Harita, M. (2011). M&A ni yoru Nihon Kigyo no Koyou heno Eikyo (M&a effects on employment in Japanese enterprises). Financial Review, 107, 18–40 (in Japanese).
Tanaka, A. (2013). Rokidai Kigyo Shudan no Mukinouka: Posuto Baburuki ni okeru Kigyoukan Nettowahku no Ohganaizingu (the big six corporate complexes in the twilight: Early 2000s in Japan). Doshisha Shogaku (The Doshisha Business Review), 64(5), 330–351 (in Japanese).
The House of Representatives. (2003). Law on Special Measures for the Revitalization of Industrial Dynamism. http://www.shugiin.go.jp/internet/itdb_housei.nsf/html/housei/h145131.htm. Accessed on 10 March 2019.
The House of Representatives. (1999). Partial Amendment of the Commercial Code. http://www.shugiin.go.jp/internet/itdb_housei.nsf/html/housei/h145125.htm. Accessed on 10 March 2019.
The House of Representatives. (1997). Partial Amendment of the Antimonopoly Act. http://www.shugiin.go.jp/internet/itdb_housei.nsf/html/houritsu/14019970618087.htm. Accessed on 10 March 2019.
Thompson Reuters. (2015). SDC Platinum. New York, USA.
Tsutsumi, M., Tamaki, J., & Hayashi, E. (2017). Mitsubishi solidarity survived war but succumbs to changing times: ‘Zaibatsu’ descendants grapple with pressures hitting much of Japan Inc. Nikkei Asian Review December 24, 2017. https://asia.nikkei.com/Business/Mitsubishi-solidarity-survived-war-but-succumbs-to-changing-times. Accessed on March 2019.
Toyo Keizai Inc. (2015). Kabuka CD-ROM. Tokyo, Japan.
Welch, B. L. (1937). The significance of the difference between two means when the population variance are unequal. Biometrika, 29, 350–361.
Yeh, T., & Hoshino, Y. (2001). Productivity and operating performance of Japanese merging firms: Keiretsu-related and independent mergers. Japan and the World Economy, 14, 347–366.
Author information
Authors and Affiliations
Corresponding author
Additional information
Publisher’s Note
Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.
Rights and permissions
About this article
Cite this article
Kaneko, K., Kashiwazaki, R. & Takeda, F. Does Japanese Business Group Membership Improve Post-Merger Performance?. Int Adv Econ Res 26, 45–57 (2020). https://doi.org/10.1007/s11294-020-09768-2
Published:
Issue Date:
DOI: https://doi.org/10.1007/s11294-020-09768-2