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Union rents as a source of takeover gains among target shareholders

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  • Brian E. Becker
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    Abstract

    This paper tests the hypothesis that the substantial gains enjoyed by shareholders in target firms during the corporate acquisition boom of the 1980s reflected, in part, shareholders' recouping of the value of "rents" (in the form of wage premiums, higher fringe benefits, and constraints on managerial authority) held by unionized labor. Analyzing data on the merger and acquisition experience of nearly 300 large publicly traded target firms during the period 1982-86, the author finds, consistent with that hypothesis, that shareholders' average returns from takeover activity were higher in unionized target firms (41%) than in nonunion target firms (35%). For unionized workers, these effects are equivalent to an annualized employee "loss" approaching 8% of annual earnings, or 50% of the wage premium conventionally associated with union coverage. (Abstract courtesy JSTOR.)

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    Bibliographic Info

    Article provided by ILR Review, Cornell University, ILR School in its journal ILR Review.

    Volume (Year): 49 (1995)
    Issue (Month): 1 (October)
    Pages: 3-19

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    Handle: RePEc:ilr:articl:v:49:y:1995:i:1:p:3-19

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    Cited by:
    1. Chris Doucouliagos & Patrice Laroche, 2007. "Unions and Profitability: A Meta-Analysis," Economics Series 2007_01, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance.
    2. Giovanni Cespa & Giacinta Cestone, 2002. "Stakeholder Activism, Managerial Entrenchment, and the Congruence of Interests between Shareholders and Stakeholders," UFAE and IAE Working Papers 528.02, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
    3. Cespa, Giovanni & Cestone, Giacinta, 2004. "Corporate Social Responsibility and Managerial Entrenchment," CEPR Discussion Papers 4648, C.E.P.R. Discussion Papers.
    4. Patrice Laroche & Hristos Doucouliagos, 2009. "Unions and Profits: A meta-regression Analysis," Post-Print hal-00648569, HAL.
    5. Arturo, Ramirez Verdugo, 2004. "Dividend Signaling and Unions," MPRA Paper 2273, University Library of Munich, Germany, revised 04 Oct 2006.
    6. M. Pagano & P. F. Volpin, 2005. "Managers, Workers, and Corporate Control," Journal of Finance, American Finance Association, vol. 60(2), pages 841-868, 04.
    7. Lars-Hendrik Röller & Johan Stennek & Frank Verboven, 2000. "Efficiency Gains from Mergers," CIG Working Papers FS IV 00-09, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).

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