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Understanding the M&A boom in Japan: What drives Japanese M&A?

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  • ARIKAWA Yasuhiro
  • MIYAJIMA Hideaki
Abstract
In this paper, we examine the causes of the first merger boom since the late 1990s in Japan. Using industry-level data, we show that mergers and acquisitions (M&As) are driven mainly by economic shocks. While industries with higher growth opportunities are likely to have more M&A activity, industries facing negative fundamental shocks, such as rapid sales declines, also experience larger M&A deals. These results suggest that the recent merger wave in Japan is mainly explained by the neoclassical model. At the firm level, we find that the bidder is the firm with the higher growth opportunity, and the target is the one with the lower growth opportunity. This means that Japanese firms improved their efficiency through merger activity since the 1990s. Lastly, we find that internal funds for the acquiring firm play a very important role in bidding activity, while a high probability of being targeted for M&A is associated with high leverage.

Suggested Citation

  • ARIKAWA Yasuhiro & MIYAJIMA Hideaki, 2007. "Understanding the M&A boom in Japan: What drives Japanese M&A?," Discussion papers 07042, Research Institute of Economy, Trade and Industry (RIETI).
    • Handle: RePEc:eti:dpaper:07042
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    File URL: https://www.rieti.go.jp/jp/publications/dp/07e042.pdf
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    Cited by:

    1. Kaoru Hosono & Koji Sakai & Kotaro Tsuru, 2009. "Consolidation of Banks in Japan: Causes and Consequences," NBER Chapters, in: Financial Sector Development in the Pacific Rim, pages 265-309, National Bureau of Economic Research, Inc.
    2. Gregory JACKSON & MIYAJIMA Hideaki, 2007. "Varieties of Capitalism, Varieties of Markets: Mergers and Acquisitions in Japan, Germany, France, the UK and USA," Discussion papers 07054, Research Institute of Economy, Trade and Industry (RIETI).
    3. Masanori Orihara & Yoshiaki Ogura & Yue Cai, 2022. "Borrowing in Unsettled Times and Cash Holdings Afterwards," Working Papers 2207, Waseda University, Faculty of Political Science and Economics.
    4. Taguchi, Hiroyuki, 2013. "The impacts of M&A on employment and labor productivity in Japan," MPRA Paper 65705, University Library of Munich, Germany.

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