Better Together? Retail Chain Performance Dynamics in Store Expansion before and after Mergers

38 Pages Posted: 9 Oct 2014 Last revised: 13 Apr 2015

See all articles by Mitsukuni Nishida

Mitsukuni Nishida

Johns Hopkins University - Carey Business School

Nathan Yang

McGill Desautels Faculty of Management

Date Written: April 13, 2015

Abstract

This paper evaluates how mergers affect profitability of retail chains. We estimate a dynamic model of retail expansion using data on convenience-store chains in Japan. Our estimation allows for the presence of serially correlated unobservables that evolve endogenously and selection biases in sales. The estimates reveal that although the merged firm enhanced efficiency in sunk costs of expansion, underlying unobserved performance dynamics for the merged entity did not improve following the merger, and such changes in dynamics varied across markets. A counterfactual simulation reveals the slower growth of profitability is associated with the merged firm's diminished ability to retain profitability.

Keywords: Dynamic discrete choice; Entry; Industry dynamics; Learning-by-doing; Market concentration; Merger analysis; Particle filter; Revenue regression; Serial correlation; Retailing.

Suggested Citation

Nishida, Mitsukuni and Yang, Nathan, Better Together? Retail Chain Performance Dynamics in Store Expansion before and after Mergers (April 13, 2015). NET Institute Working Paper No. 14-08. Available at SSRN: https://ssrn.com/abstract=2506349 or http://dx.doi.org/10.2139/ssrn.2506349

Mitsukuni Nishida (Contact Author)

Johns Hopkins University - Carey Business School ( email )

100 International Drive
Baltimore, MD 21202
United States

HOME PAGE: http://https://sites.google.com/site/mitsukuninishida/

Nathan Yang

McGill Desautels Faculty of Management ( email )

1001 Sherbrooke St. West
Montreal, Quebec H3A1G5 H3A 2M1
Canada
514-378-6233 (Phone)

HOME PAGE: http://www.mcgill.ca/desautels/nathan-yang

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
61
Abstract Views
528
rank
366,828
PlumX Metrics