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Should employment authorities worry about mergers and acquisitions ?

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Abstract

This paper considers the role mergers and acquisitions have on employment. First, it considers the importance of different aspects of compensation policy and human resource management practices for distinguishing acquired and acquiring firms. Second, it examines which individuals from which firms remain with the newly created entity after the takeover. Using a unique employer-employee linked data set for France, we find that very few observable workforce or compensation characteristics distinguish acquired from acquiring firms ex-ante. Nevertheless, the human resources department seems to be quite active in the post-takeover period, with employees of the acquired firm being less likely to remain with the new entity in the short term after takeover than those of the acquiring firm and with the differences between the two types of firms disappearing after 3 years. The workers with characteristics that tend to be associated with the fastest subsequent job finding in the displaces worker literature are also those who tend to be overrepresented among the individuals who separate from their employer post-takeover. Finally, as both acquired and acquiring firms differ from firms not involved in takeover activity in a similar manner, employment authorities may be able to anticipate the regions in which takeovers are more likely to occur by looking at the financial accounts of firms with particular characteristics that have local establishments.

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File URL: ftp://mse.univ-paris1.fr/pub/mse/cahiers2006/Bla06015.pdf
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Bibliographic Info

Paper provided by Université Panthéon-Sorbonne (Paris 1) in its series Cahiers de la Maison des Sciences Economiques with number bla06015a.

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Length: 43 pages
Date of creation: Feb 2006
Date of revision:
Handle: RePEc:mse:wpsorb:bla06015a

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Keywords: Employment; takeovers; linked employer-employee data.;

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References

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  1. Bruce C. Fallick, 1996. "A review of the recent empirical literature on displaced workers," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 50(1), pages 5-16, October.
  2. Matsusaka, J.C., 1991. "Takeover Motives During the Conglomerate Merger Wave," Papers 91-33, Southern California - School of Business Administration.
  3. Gibbons, Robert & Katz, Lawrence F., 1991. "Layoffs and Lemons," Scholarly Articles 3442782, Harvard University Department of Economics.
  4. Eckbo, B. Espen, 1983. "Horizontal mergers, collusion, and stockholder wealth," Journal of Financial Economics, Elsevier, vol. 11(1-4), pages 241-273, April.
  5. Jagadeesh Gokhale & Erica L. Groshen & David Neumark, 1992. "Do hostile takeovers reduce extramarginal wage payments?," Working Paper 9215, Federal Reserve Bank of Cleveland.
  6. Henry G. Manne, 1965. "Mergers and the Market for Corporate Control," Journal of Political Economy, University of Chicago Press, vol. 73, pages 110.
  7. Charles Brown & James L. Medoff, 1988. "The Impact of Firm Acquisitions on Labor," NBER Chapters, in: Corporate Takeovers: Causes and Consequences, pages 9-32 National Bureau of Economic Research, Inc.
  8. Compte, Olivier & Jenny, Frederic & Rey, Patrick, 2002. "Capacity constraints, mergers and collusion," European Economic Review, Elsevier, vol. 46(1), pages 1-29, January.
  9. David N. MARGOLIS, 1996. "Cohort Effects and Returns to Seniority in France," Annales d'Economie et de Statistique, ENSAE, issue 41-42, pages 443-464.
  10. Borenstein, Severin, 1990. "Airline Mergers, Airport Dominance, and Market Power," American Economic Review, American Economic Association, vol. 80(2), pages 400-404, May.
  11. Marianne Bertrand & Sendhil Mullainathan, 2003. "Enjoying the Quiet Life? Corporate Governance and Managerial Preferences," Journal of Political Economy, University of Chicago Press, vol. 111(5), pages 1043-1075, October.
  12. Henry G. Manne, 1965. "Mergers and the Market for Corporate Control," Journal of Political Economy, University of Chicago Press, vol. 73, pages 351.
  13. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
  14. John M. Abowd & Francis Kramarz & David N. Margolis, 1994. "High Wage Workers and High Wage Firms," NBER Working Papers 4917, National Bureau of Economic Research, Inc.
  15. Bradley, Michael & Desai, Anand & Kim, E. Han, 1983. "The rationale behind interfirm tender offers : Information or synergy?," Journal of Financial Economics, Elsevier, vol. 11(1-4), pages 183-206, April.
  16. Lazear, Edward P, 1979. "Why Is There Mandatory Retirement?," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1261-84, December.
  17. David N. Margolis, 2002. "Licenciements collectifs et délais de reprise d'emploi," Économie et Statistique, Programme National Persée, vol. 351(1), pages 65-85.
  18. Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-29, May.
  19. Jensen, Michael C, 1988. "Takeovers: Their Causes and Consequences," Journal of Economic Perspectives, American Economic Association, vol. 2(1), pages 21-48, Winter.
  20. Alan J. Auerbach, 1988. "Corporate Takeovers: Causes and Consequences," NBER Books, National Bureau of Economic Research, Inc, number auer88-1, May.
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Cited by:
  1. repec:ebl:ecbull:v:30:y:2010:i:1:p:614-623 is not listed on IDEAS
  2. Lehto, Eero & Böckerman, Petri, 2008. "Analysing the employment effects of mergers and acquisitions," Journal of Economic Behavior & Organization, Elsevier, vol. 68(1), pages 112-124, October.
  3. Oliver Budzinski & Jürgen-Peter Kretschmer, 2009. "Horizontal Mergers, Involuntary Unemployment, and Welfare," Working Papers 90/09, University of Southern Denmark, Department of Environmental and Business Economics.
  4. repec:hal:wpaper:halshs-00648876 is not listed on IDEAS

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