Discussion Paper Series 2022-E-7

Performance of Exiting Firms in Japan: An Empirical Analysis Using Exit Mode Data

Yojiro Ito, Daisuke Miyakawa

Studies on firm performance have found that exiting firms in Japan persistently show better performance than surviving firms, and this persistence adversely affects aggregate productivity. We use the panel data of business enterprises along with unique information on their exit modes (i.e., default, voluntary closure, and merger) to show that a large part of such a "negative exit effect" is attributed to the firms exiting through mergers. Further, we confirm that the causal effect of those mergers results in positive growth in the productivity of merging firms. Given that the size of such a positive causal effect overwhelms the negative exit effect, resource reallocation through mergers positively contributes to the aggregate growth in productivity for Japanese firms.

Keywords: Productivity dynamics; Exit effects; Mergers


Views expressed in the paper are those of the authors and do not necessarily reflect those of the Bank of Japan or Institute for Monetary and Economic Studies.

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