This paper examines the long-term operating performance following 69 mergers of manufacturing firms traded on the Tokyo Stock Exchange during 1969 to 1999. We find evidence of improvements in operating performance for the entire sample, and that the pre- and post-merger performance is highly correlated. Moreover, the long-term performance is significantly greater following mergers of firms operating in different industries. Increases in employment surrounding the mergers are positively related to post-merger performance among diversifying mergers and mergers completed before the peak of the equity bubble in 1989. The results suggest that the primary beneficiaries of consolidation are firms that expand the scope of business of the acquiring company. Finally, existing relationships among merging firms and mergers with distressed targets are not related to post-merger performance.
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