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How general is managerial human capital?: Evidence from the Retention of Managers after M&As

Kenjiro Hirata
Kenjiro Hirata
, 
Ayako Suzuki
Ayako Suzuki
 and 
Katsuya Takii
Katsuya Takii
   | Dec 31, 2023
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Published Online: Dec 31, 2023
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Accepted: Apr 11, 2023
DOI: https://doi.org/10.2478/izajole-2023-0008
Keywords
© 2023 Kenjiro Hirata et al., published by Sciendo
This work is licensed under the Creative Commons Attribution 4.0 International License.

Figure 1

Number of M&As each year during the period 1990–2006.
Number of M&As each year during the period 1990–2006.

Figure 2

Kernel density of estimated unobserved skill.
Kernel density of estimated unobserved skill.

Stratified Cox proportional hazards model estimation

Variable (1) (1)
Coef. Std. Err. Coef. Err.ef.
1: Tenure as a board member −0.002 0.022 −0.016 0.009
2: Tenure as an employee 0.010 0.006 * 0.010 0.005 *
3: Tenure as a board member × initial dummy −0.005 0.022 0.007 0.010
4: Tenure as an employee × initial dummy −0.013 0.006 ** −0.012 0.005 ***
Age 0.116 0.026 *** 0.107 0.016 ***
Board size 0.036 0.020 * 0.039 0.046 **
No. of firms as a board member −0.358 0.094 *** −0.361 0.082 ***
Board member in the acquirer before the M&A −0.229 0.074 *** −0.232 0.064 ***
Acquisition 0.579 0.156 *** 0.578 0.139 ***
Target ROA −0.466 1.000 −0.463 4.068
Related −0.244 0.106 ** −0.252 0.097 ***
Target firm's relative size in assets −1.016 0.437 ** −1.006 0.374 ***
Log target assets −0.036 0.053 −0.040 0.049
Upper −0.279 0.059 *** −0.275 0.133 ***
Log stock share of top 10 −0.009 0.057 −0.008 0.195
Acquirer or others ROA 1.223 1.439 1.370 1.219
Log top 10 share of acquirer or others −0.028 0.047 −0.035 0.043
χ˜fj {\tilde \chi _{fj}} 0.036 0.033
Age × I(t = 0) −0.076 0.026 *** −0.069 0.017 ***
Board size × I(t = 0)
No. of firms as a board member × I(t = 0)
Board member in the acquirer before the M&A
Acquisition × I(t = 0)
Target ROA × I(t = 0)
Related × I(t = 0)
Target firm's relative size in assets × I(t = 0) −0.294 0.484 −0.289 0.414
Log target assets × I(t = 0)
Upper × I(t = 0)
Log stock share of top 10 × I(t = 0)
Acquirer or others ROA × I(t = 0)
Log top 10 share of acquirer or others × I(t = 0)
χ˜fj×It=0 {\tilde \chi _{fj}} \times I\left( {t = 0} \right) −0.027 0.034
Wald Test Coef. Chi2(1) Coef. Chi2(1)
1 + 3 −0.006 1.18 −0.009 5.58 **
2 + 4 −0.003 2.95 * −0.003 4.08 **
Number of observations 2108 2108

Numbers of mergers and acquisitions by industry

Industry No. of target firms No. of new firms Both
Food 15 16 14
Textile 7 8 5
Pulp 13 13 10
Chemical 19 21 14
Pharmaceutical 6 3 2
Petroleum 3 6 3
Rubber 2 1 1
Ceramic 14 13 10
Iron ore 7 13 7
Nonferrous metal and metal 15 18 10
Machinery 24 24 16
Electronics 27 46 24
Shipbuilding 0 1 0
Automobile 9 9 4
Transport machinery 6 0 0
Precision instruments 2 2 1
Other manufacturers 10 9 6
Marine products 1 0 1
Mining 4 2 2
Construction 26 26 16
Trade 43 32 22
Retail 27 31 21
Other financial businesses 2 4 2
Real estate 11 1 1
Rail and bus 2 12 2
Land transportation 2 4 2
Marine transportation 7 6 6
Air transportation 1 3 1
Telecommunications 4 2 2
Electricity 0 2 0
Service 35 15 13
Total 344 344 218

Characteristics of target directors

Variable No. of observations Mean S.D. Min. Max.
Retained 1520 0.387 0.487 0 1
Years of survival if retained 588 4.117 2.190 1 16

Estimated unobserved skill

Obs. Mean Std. Dev. Min. Max.
χ˜fj {\tilde \chi _{fj}} 1520 −6.606 5.104 −44.191 5.654

GMM estimation

Variable Coef. Std. Err.
Negative operating income −0.636 0.404
Direct −1.964 1.030 *
No. of employees 0.000 0.000
Wage 0.242 0.049 ***
Median tenure as a titled director 0.025 0.028
Median age 0.801 0.253 ***
Constant ϕ˜0 \left( {{{\tilde \phi }_0}} \right) 73.183 13.474 ***
Tenure as an employee (ϕe) 0.400 0.230 *
Outside experience ϕ˜o \left( {{{\tilde \phi }_o}} \right) 0.382 0.224 *
1/(ζ + 1) 0.663 0.051 ***
Sales 0.000 0.000 *
Industry code dummy Yes
Decade dummy Yes
Number of observations 1519

Summary statistics

Variable No. Mean S.D. Min. Max.
Tenure as a board member at t^j⋆ \hat t_j^\star (years) 1520 2.70 2.91 0.00 20.92
Tenure as a board member at t^fm \hat t_f^m (years) 1520 8.50 7.41 0.25 56.42
Tenure as an employee (years) 1520 11.82 13.59 0.00 43.17
Outside experience (years) 1520 40.35 15.62 15.17 71.17
Age (years) 1520 60.67 5.54 35.08 90.92
Variables in Nhf,t^ {{\boldsymbol {N}}_h}\left( {f,\hat t} \right) , for t^=t^j⋆,t^fm \hat t = \hat t_j^\star,\hat t_f^m
  Negative operating income at t^j⋆ \hat t_j^\star 1520 0.15 0.36 0.00 1.00
  Negative operating income at t^fm \hat t_f^m 1520 0.21 0.41 0.00 1.00
  Direct 1520 0.20 0.40 0.00 1.00
  No. of employees at t^j⋆ \hat t_j^\star (1000) 1520 1.70 2.65 0.006 23.87
  No. of employees at t^fm \hat t_f^m (1000) 1520 1.53 2.24 0.006 16.35
  Wage at t^j⋆ \hat t_j^\star (million yen) 1520 4.25 3.37 0.08 28.39
  Wage at t^fm \hat t_f^m (million yen) 1519 5.03 3.89 0.21 25.57
  Median tenure as a titled director at t^j⋆ \hat t_j^\star (years) 1520 4.89 4.00 0 33.17
  Median tenure as a titled director at t^fm \hat t_f^m (years) 1520 4.61 3.19 0.50 24.67
  Median age of titled directors at t^fm \hat t_f^m (years old) 1520 55.35 4.34 27.58 69.17
Variables in Nχf,t^fm {{\boldsymbol {N}}_\chi }\left( {f,\hat t_f^m} \right)
  Sales (1000 million yen) 1520 146.78 256.95 0.68 2877.40
τft^fm {{\boldsymbol {\tau }}_f}\left( {\hat t_f^m} \right) , τft^j⋆ {{\boldsymbol {\tau }}_f}\left( {\hat t_j^\star} \right) (instrumental variables)
  Median value of tenure as a board member at t^fm \hat t_f^m (years) 1520 7.48 4.17 0.25 32.42
  Median value of tenure as an employee (years) 1520 10.84 12.17 0.00 35.83
  Median value of outside experience (years) 1520 40.20 13.66 20.42 68.42
Manager characteristics
  No. of firms as a board member 1520 1.14 0.51 1.00 10.00
  Board member in the acquirer before the M&A 1520 0.15 0.35 0.00 1.00
  Upper 1520 0.31 0.46 0.00 1.00
  Target ROA 1520 0.00 0.06 −0.43 0.52
Firm characteristics
  Log target assets 1520 11.07 1.35 6.92 14.61
  Board size 1520 5.77 2.73 1.00 15.00
  Log stock share of top 10 1520 −6.89 1.35 −8.39 −0.14
  Target firm's relative size in assets 1520 0.27 0.23 0.00 0.99
  Related 1520 0.48 0.50 0.00 1.00
  Acquisition 1520 0.61 0.49 0.00 1.00
  Acquirer or others ROA 1520 0.00 0.06 −0.68 0.60
  Log top 10 share of acquirer or others 1520 −7.09 1.56 −8.89 0.00
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