Luigi Benfratello
(Ceris-Cnr, Turin and University of Rome "Tor Vergata")

December 1999

Abstract

Unlike traditional studies on the efficiency-enhancing effect of ownership changes – which use either profitability measures or stock prices – this paper measures the effect of acquisitions directly on acquired firms’ technical efficiency. Using a panel of Italian firms in the pasta industry for the 1981-1997 period, I estimate a stochastic production frontier with factors affecting efficiency (i.e. the Battese and Coelli (1995) model), in a translog specification with non-neutral technical progress. The results show that acquired firms’ technical efficiency increases within the six years period following the acquisition, regardless of the nationality of the acquirer, and that a more productive use of resources, in particular labour, is the main source of this increase. However, the analysis beyond the six years period casts some doubts about the persistency of this increase.

Key words: Acquisitions, Technical efficiency, Factor Productivity.
JEL Classification: L40, L66.