Gains from mergers and acquisitions in Japan

Abstract

This study focuses on the dynamics of the market for corporate control in Japan. We evaluate the short-term wealth effects of mergers and acquisitions that take place between January 2000 and December 2014, from the perspectives of shareholders of both the acquiring and the acquired firms. We find that the shareholders of acquiring firms experience no significant wealth effects, but the acquired firms' shareholders reap significant benefits. Given the recency of the data used in this study, we conclude that Japan's market for corporate control has become more competitive and now behaves like those of the United States and other Western nations. We also study the abnormal returns earned by acquiring shareholders over the sixty months following the event and find no discernible pattern of long-term gains. Finally, analyzing the longer-term effects of mergers on the acquiring firm's environmental, social, and governance performance, we find no discernible improvements on any of these fronts.