When Vultures Bring Blessings: Employment Growth in Japanese businesses under Private Equity Ownership

Abstract

Tracking the effect of private equity ownership on employment in Japan, we find evidence that employment grows significantly under private equity ownership, a finding that runs against common expectations and stands in stark contrast with results from studies on Anglo-Saxon economies. We further find that the increase is not attributable to selection effects and that growth rates during the holding period are significantly higher than under the previous ownership. Triangulating these findings through interviews with labor, management, and fund ownership, we find implicit labor protection through reputational concerns the underlying taming mechanism for the observed deviation from expected patterns of employment reduction