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Do Hostile Takeovers Reduce Extramarginal Wage Payments?

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  • Gokhale, Jagadeesh
  • Groshen, Erica L
  • Neumark, David

Abstract

We study the relationship between proxies for extramarginal wage payments and subsequent hostile takeover activity, and find little evidence that the takeovers are motivated by the expropriation of extramarginal wages. Then, using data on wage and employment structures both before and after takeovers, we investigate whether proxies for extramarginal wage payments drop after hostile takeovers. The ex post experiments provide evidence consistent with one version of the expropriation hypothesis. Although our findings do not suggest that hostile takeovers reduce workers' shares of rents, such takeovers do appear to reduce extra marginal wage payments to more-tenured workers in two ways: first, by reducing employment of more-senior workers; and second, by flattening wage-seniority profiles in firms or establishments with relatively senior work forces. Copyright 1995 by MIT Press.

Suggested Citation

  • Gokhale, Jagadeesh & Groshen, Erica L & Neumark, David, 1995. "Do Hostile Takeovers Reduce Extramarginal Wage Payments?," The Review of Economics and Statistics, MIT Press, vol. 77(3), pages 470-485, August.
    • Handle: RePEc:tpr:restat:v:77:y:1995:i:3:p:470-85
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    JEL classification:

    • D20 - Microeconomics - - Production and Organizations - - - General
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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