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

Kenjiro Hirata; Ayako Suzuki; Katsuya Takii

doi:10.2478/izajole-2023-0008

Figures & Tables

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

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 (ϕ_e)	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

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

Figures & Tables

Figure 1

Figure 2

Stratified Cox proportional hazards model estimation

Numbers of mergers and acquisitions by industry

Characteristics of target directors

Estimated unobserved skill

GMM estimation

Summary statistics

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