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Journal of Financial Economics Vol. 102 No. 2 2011

Post-merger restructuring and the boundaries of the firm

Vojislav Maksimovic1,2,3,4,5; Gordon M. Phillips1,2,3,4,5; Nagpurnanand Prabhala1,2,3,4,5

1 Indian School of Business · 2 National Bureau of Economic Research · 3 University of Mannheim · 4 University of Maryland, College Park · 5 University of Hong Kong

Abstract

We examine how firms redraw their boundaries after acquisitions using plant-level data. We find that there is extensive restructuring in a short period following mergers and full-firm acquisitions. Acquirers of full firms sell 27% and close 19% of the plants of target firms within three years of the acquisition. Acquirers with skill in running their peripheral divisions tend to retain more acquired plants. Retained plants increase in productivity whereas sold plants do not. These results suggest that acquirers restructure targets in ways that exploit their comparative advantage.

DOI
10.1016/j.jfineco.2011.05.013
Volume
102
Issue
2
Pages
317-343
Language
en
Sources
openalex crossref bibtex:phds-export.bib

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