CES-WP-93-16
The Financial Performance of Whole Company LBOs
David Ravenscraft, William Long
November 01, 1993
Using the previously untapped Census Quarterly Financial Report (QFR) file, we explored the financial performance of a large unbiased sample of 209 leveraged buyouts (LBOs) and 48 going private transactions occurring between 1978 and 1989. Our principal findings are: First, we confirm previous work showing that LBOs substantially increase operating performance and reduce taxes. Second, we find that the operating performance gains are sustained for three years. However, there is a significant drop in performance in the fourth and fifth years. Performance in these years is not significantly above the pre- LBO level. Third, total debt to assets displays only a slight insignificant downward trend. Thus, high debt remains after the drop in performance. Fourth, we find evidence that the performance gains decline in the mid- to late 1980s, with the exception of 1989. Fifth, the data suggest that LBOs target typical firms. The only significant pre-LBO firm characteristic was lower bank debt relative to nonbank debt. Sixth, we identify a number of factors that differentiate LBO performance. Performance tends to be higher when pre-LBO performance is low and the firm is classified as a large R&D performer. Conversely, management buyouts and buyouts involving extensive restructuring did not outperform other buyouts. Finally, we observe a clear linkage between debt and performance, since nonleveraging going-private deals have significantly lower performance than LBOs.
 View Paper 38 Pages 91136 Bytes
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CES-WP-93-15
On Productivity and Plant Ownership Change: New Evidence From the LRD
Robert Mcguckin, Sang Nguyen
November 01, 1993
This paper investigates the questions of what type of establishment experiences ownership change, and how the transferred properties perform after acquisition. Are they the profitable operations suggested by Ravenscraft and Scherer (1986), or the poorly operating ones found by Lichtenberg and Siegel (1992)? Is the primary motive of ownership change the rehabilitation of low productivity plants as suggested by Lichtenberg and Siegel? Our empirical work is based on an unbalanced panel of 28,294 plants taken from the U.S. Bureau of the Census' Longitudinal Research Database ( LRD ). The data set provides complete coverage of the food manufacturing industry (SIC 20) for the period 1977-1987. Our principle findings are that (1) ownership change is generally associated with the transfer of plants with above average productivity, however, large plants, empirically, those with more than 200 employees, are more likely to be purchased than closed when they are performing poorly; and (2) transferred plants experience improvement in productivity performance following the ownership change. The Rand Journal of Economics, Volume 26, Number 2, Summer 1995, pp. 257-276.
View Paper 46 Pages 100352 Bytes
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CES-WP-93-14
Testing the Advantages of Using Product Level Data to Create Linkages Across Industrial Coding Systems
Suzanne Peck
October 01, 1993
After the major revision of the U.S. Standard Industrial Classification system (SIC) in the 1987, the problem arose of how to evaluate industrial performance over time. The revision resulted in the creation of new industries, the combination of old industries, and the remixing of other industries to better reflect the present U.S. economy. A method had to be developed to make the old and new sets of industries comparable over time. Ryten (1991) argues for performing the conversion at the "most micro level," the product level. Linking industries should be accomplished by reclassifying product data of each establishment to a standard system, reassigning the primary activity of the establishment, reaggregating the data to the industry level, and then making the desired statistical comparison (Ryten, 1991). This paper discusses linking the data at the very micro, product level, and at the more macro, industry level. The results suggest that with complete product information the product level conversion is preferable for most industries in manufacturing because it recognizes that establishments may switch their primary industry because of the conversion. For some industries, especially those having no substantial changes in SIC codes over time, the conversion at the industry level is fairly accurate. A small group of industries lacks complete product information in 1982 to link the 1982 product codes to the 1987 codes. This results in having to rely on the industry concordance to create a time series of statistics. Proceedings of the International Conference on Establishment Surveys, America Statistical Association (1994).
View Paper 33 Pages 62464 Bytes
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CES-WP-93-13
The Long-Run Demand for Labor: Estimates From Census Establishment Data
Timothy Dunne, Mark Roberts
September 01, 1993
This paper estimates long-run demand functions for production workers, production worker hours, and nonproduction workers using micro data from U.S. establishment surveys. The paper focuses on estimation of the wage and output elasticities of labor demand using data on over 41,000 U.S. manufacturing plants in 1975 and more than 30,000 plants in 1981. Particular attention is focused on the problems of unobserved producer heterogeneity and measurement errors in output that can affect labor demand estimates based on establishment survey data. The empirical results reveal that OLS estimates of both the own-price elasticity and the output elasticity of labor demand are biased downward as a result of unobserved heterogeneity. Differencing the data as a solution to this problem greatly exaggerates measurement error in the output coefficients. The use of capital stocks as instrumental variables to correct for measurement error in output significantly alters output elasticities in the expected direction but has no systematic effect on own-price elasticities. All of these patterns are found in estimates that pool establishment data across industries and in industry-specific regressions for the vast majority of industries. Estimates of the output elasticity of labor demand indicate that there are slight increasing returns for production workers and production hours, with a pooled data estimate of .92. The estimate for nonproduction workers in .98. The variation in the output elasticities across industries is fairly small. Estimates of the own-price elasticity vary more substantially with the year, type of differencing used, and industry. They average -.50 for production hours, -.41 for production workers, and -.44 for nonproduction workers. The price elasticities vary widely across manufacturing industries: the interquartile range for the industry estimates is approximately .40.
View Paper 52 Pages 131072 Bytes
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CES-WP-93-12
CONSTRUCTION OF REGIONAL INPUT-OUTPUT TABLES FROM ESTABLISHMENT-LEVEL MICRODATA: ILLINOIS, 1982
Eduardo Martins
August 01, 1993
This paper presents a new method for use in the construction of hybrid regional input-output tables, based primarily on individual returns from the Census of Manufactures. Using this method, input- output tables can be completed at a fraction of the cost and time involved in the completion of a full survey table. Special attention is paid to secondary production, a problem often ignored by input-output analysts. A new method to handle secondary production is presented. The method reallocates the amount of secondary production and its associated inputs, on an establishment basis, based on the assumption that the input structure for any given commodity is determined not by the industry in which the commodity was produced, but by the commodity itself -- the commodity-based technology assumption. A biproportional adjustment technique is used to perform the reallocations.
View Paper 58 Pages 203915 Bytes
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CES-WP-93-11
Determinants Of Survival And Profiability Among Asian Immigrant-Owned Small Businesses
Timothy Bates
August 01, 1993
The immigrant entrepreneur is often seen as a member of supportive peer and community subgroups. These networks assist in the creation and successful operation of firms by providing social resources in the form of customers, loyal employees and financing. This study provides evidence that the success and survival patterns of Asian immigrant firms derive from their large investments of financial capital and the impressive educational credentials of the business owners. Heavy utilization of social support networks typifies the less profitable, more failure-prone small businesses owned by Asian immigrants. Social Forces, Volume 72, Number 3, pp. 671-689.
View Paper 51 Pages 99328 Bytes
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CES-WP-93-10
The Importance of Establishment Data in Economic Research
Robert Mcguckin
August 01, 1993
The importance and usefulness of establishment microdata for economic research and policy analysis is outlined and contrasted with traditional products of statistical agencies -- aggregate cross-section tabulations. It is argued that statistical agencies must begin to seriously rethink the way they view establishment data products. Proceedings of the International Conference on Establishment Surveys, 1993.
View Paper 23 Pages 38912 Bytes
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CES-WP-93-9
Energy Intensity, Electricity Consumption, and Advanced Manufacturing Technology Usage
Mark Doms
July 01, 1993
This paper reports on the relationship between the usage of advanced manufacturing technologies (AMTs) and energy consumption patterns in manufacturing plants. Using data from the Survey of Manufacturing Technology and the 1987 Census of Manufactures, we model the energy intensity and the electricity intensity of plants as functions of AMT usage and plant age. The main findings are that plants which utilize AMTs are less energy intensive than plants not using AMTs but consume proportionately more electricity as a fuel source. Additionally, older plants are generally more energy intensive and rely on fossil fuels to a greater extent than younger plants.
View Paper 26 Pages 99328 Bytes
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CES-WP-93-8
Evidence on IO Technology Assumptions From the Longitudinal Research Database
Joe Mattey
May 01, 1993
This paper investigates whether a popular IO technology assumption, the commodity technology model, is appropriate for specific United States manufacturing industries, using data on product composition and use of intermediates by individual plants from the Census Longitudinal Research Database. Extant empirical research has suggested the rejection of this model, owing to the implication of aggregate data that negative inputs are required to make particular goods. The plant-level data explored here suggest that much of the rejection of the commodity technology model from aggregative data was spurious; problematic entries in industry-level IO tables generally have a very low Census content. However, among the other industries for which Census data on specified materials use is available, there is a sound statistical basis for rejecting the commodity technology model in about one-third of the cases: a novel econometric test demonstrates a fundamental heterogeneity of materials use among plants that only produce the primary products of the industry.
View Paper 47 Pages 77824 Bytes
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CES-WP-92-13
Gender Segregation Small Firms
William Carrington, Kenneth Troske
May 01, 1993
This paper studies interfirm gender segregation in a unique sample of small employers. We focus on small firms because previous research on interfirm segregation has studied only large firms and because it is easier to link the demographic characteristics of employers and employees in small firms. This latter feature permits an assessment of the role of employer discrimination in creating gender segregation. Our first finding is that interfirm segregation is prevalent among small employers. Indeed men and women rarely work in fully integrated firms. Our second finding is that the education and gender of the business owner strongly influence the gender composition of a firm's workforce. This suggests that employer discrimination may be an important cause of workplace gender segregation. Finally, we estimate that interfirm segregation can account for up to 50% of the gender gap in annual earnings.
View Paper 53 Pages 172032 Bytes
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