FRANK R. LICHTENBERG Columbia University and National Bureau of Economic Research DONALD SIEGEL Columbia University Productivity and Changes in Ownership of Manufacturing Plants SINCE the early 1970s the number of U. S. companies involvedin mergers, acquisitions, and other types of ownership change has increasedmark- edly:from 926completed transactions in 1974 to 2,326 in 1981, and4,024 in 1986. The number has in effect doubled aboutevery six or seven years (table 1). And the value of the companies involved increased almost sixfold between 1980 and 1986,far outpacing the 33 percentincrease in the consumerprice index and the 17 percent increase in the producer price index. These developments have stimulated intense debateon the consequences of changes in ownership, particularly for economic effi- ciency. The debate has potentially important policy implications,be- cause a considerable amount of federal and state legislation aimed at restrictingmergers and acquisitions, especially those resulting from hostile takeovers, has been proposed.' Whether such legislation is Thispaper is based on worksupported by the National ScienceFoundation under grant SES 84-01460, conducted at the U.S. Bureau of the Census while the authors were participants in the American Statistical Association/National Science Foundation/Census Bureau research program.We are grateful to Martin Baily, Dale Jorgenson, Edwin Mansfield, Clifford Winston, andotherconference participants for helpful comments. 1. Oneproposal, for example, wouldeliminate the tax deductibility of interest onjunk bonds, whichare used to finance takeovers.According to manyobservers,including the Brady Commission, consideration of this legislation by the House Ways and Means Committee was a major factorprecipitating the stock market plunge in October1987. 643