Publication Type

Journal Article

Version

submittedVersion

Publication Date

6-2020

Abstract

Using novel firm-level data on employment quality in an international sample of M&A deals, this paper investigates the cost-benefit trade-off faced by acquirers when providing generous employment policies. We find that shareholders react more positively to deal announcements by acquirers providing generous employee incentives when the deal is domestic, but negatively when the deal is cross-border. These effects are primarily driven by the provision of monetary incentives and are strongest for firms in skilled industries. We argue that generous employment policies increase synergy gains and reduce labor adjustment costs in a domestic takeover. In cross-border deals, however, costs associated with managing employee policies across borders and lack of opportunities for eliminating work duplication negatively affect acquirer returns. Nevertheless, we find that country-specific acquisition experience can mitigate these negative effects. Our results cannot be explained by country-level labor regulations or by target-level employment policies.

Keywords

Workforce integration, Cross-border mergers and acquisitions, Employment policy, Job security, Monetary incentives, Takeovers

Discipline

Corporate Finance

Research Areas

Finance

Publication

Journal of Corporate Finance

Volume

62

First Page

1

Last Page

23

ISSN

0929-1199

Identifier

10.1016/j.jcorpfin.2020.101575

Publisher

Elsevier

Copyright Owner and License

Authors

Additional URL

https://doi.org/10.1016/j.jcorpfin.2020.101575

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