We study how revenue productivity and markups evolve after mergers across the economy. In financial-statement data, targets cease to exist as reporting entities after a deal, so tracking the merged firm requires constructing the combined acquirer-target unit before the merger. We formalize the biases that arise without this correction and implement it across 3,759 horizontal mergers in Spain between 1997 and 2022. Revenue productivity rises by approximately 4 percent within eight years and markups by approximately 5 to 6 percent. The industry decomposition reveals that revenue productivity gains are broad-based, while the overall markup increase is driven by large increases in a few industries, particularly human health activities. In the majority of industries, markup increases are small or negative. We find that without the boundary correction, both estimated effects reverse sign. The results suggest that mergers tend to raise the revenue productivity of the combined firm broadly, consistent with operational improvements, while markup increases are a feature of specific industries rather than a general consequence of consolidation.

This paper studies the impact of foreign ownership on the wage skill premium by endogenizing skill biased technological change with intangible skill complementarity in production. Increased intangible investment raises the relative demand for skilled labor, which in turn raises the wage skill premium. Foreign owned firms, who are more intangible intensive, amplify this effect. I provide supporting empirical evidence from Spain, documenting aggregate increases in intangible investment and skilled labor compensation. Foreign owned firms operate at a large scale and I show that a change to foreign ownership leads to a scaling up of production, as well as, higher relative employment of skilled workers. I develop a quantitative firm dynamics model with intangible skill complementarity in production and heterogeneity in ownership. Foreign multinationals endogenously enter through acquisition and their subsidiaries receive a technology transfer prompting them to invest at higher levels. An exogenous decline in the intangible investment price triggers the mechanism and further increases foreign entry. Upon matching the decline to the data, the model accounts for nearly forty percent of the increase in the wage skill premium between 2002 and 2017 where about a quarter is attributed to foreign ownership. Through the lens of the model, intangible investment subsidies exclusively for foreign owned firms can increase aggregate output and total factor productivity, but also have welfare implications.

We study how incorporated firms strategically choose to recognize (or not) acquired intangibles from mergers and acquisitions (M&As) in their business accounts and its implications for the measurement of economic profits and labor share. Our analysis is informed by a business accounting change in the early 2000s that forced the acquirer firms to report the acquired intangibles from M&As.

Before the accounting change, acquirer firms that had the incentive to frontload accounting profits —e.g., through CEO compensation affected by these profits—preferred to record the M&A with an accounting method (pooling) that did not recognize the acquired intangibles. This left acquired intangibles out of both the income statement and the balance sheet, which raises not only accounting profits (as the acquired intangibles are not amortized in the income statement) but also potentially economic profits that use, at face value, only assets recognized in the balance sheet.

Further, by implementing accounting obstacles to pooling, target firms leveraged the acquiror's incentive to frontload profits in order to raise the price of the acquisition, extracting a larger share of the total surplus and, hence, reflecting more accurately the marginal benefit of the acquisition. However, after the accounting change, this leverage ceases to exist, increasing the proportion of the surplus captured by the acquirers as the price paid for the acquisition lowers relative to marginal benefit of the acquisition.

Correcting for the omitted acquired intangibles at the firm level before and after the accounting change, we find measures of economic profits and labor share that are relatively trendless.