Productivity and operating performance of Japanese merging firms : keiretsu-related and independent mergers

Our empirical analysis of 86 Japanese corporate mergers, in the period from 1970 to 1994, probes productivity and operating performance of the merging firms, indicating that merging firms suffer particulary in terms of productivity, profitability, sales growth and employee growth. However, Keiretsu-independent mergers beat intra-Keiretsu mergers in the sense that the latter produced worse consequences than the former. The results suggest a higher agency cost for the conventional mergers used mainly to maintain or stregthen Keiretsu group unity. On the other hand, Keiretsu-independent mergers are more strategically oriented and similar to Anglo-American M&A