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Do Hostile Takeovers Reduce Extramarginal Wage Payments?

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Author Info
Jagadeesh Gokhale
Erica L. Groshen
David Neumark

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Abstract

Hostile takeovers may reduce the prevalence of long-term employment contracts if they facilitate the opportunistic expropriation of extramarginal wage payments. Our tests of two versions of the expropriation hypothesis improve on existing research by using firm- and establishment-level data from an employer salary survey, and by performing both ex ante and ex post tests. First, we study the relationship between proxies for extramarginal wage payments and subsequent hostile takeover activity, and find little evidence of an expropriation motive. Then. since we observe wage and employment structures both before and after takeovers. we investigate whether proxies for extramarginal wages drop after hostile takeovers. The ex post experiments provide evidence consistent with one version of the expropriation hypothesis. In particular, such takeovers appear to reduce extramarginal wage payments to more-tenured workers, mostly through flattening wage-seniority profiles in firms with relatively senior work forces.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4346.

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Date of creation: Apr 1993
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Handle: RePEc:nbr:nberwo:4346

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Find related papers by JEL classification:
D20 - Microeconomics - - Production and Organizations - - - General
J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

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    Other versions:
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  1. Leora Friedberg & Michael Owyang, 2004. "Explaining the Evolution of Pension Structure and Job Tenure," NBER Working Papers 10714, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  2. John S. Earle & Almos Telegdy, 2007. "Ownership and Wages: Estimating Public-Private and Foreign-Domestic Differentials with LEED from Hungary, 1986–2003," Staff Working Papers 07-134, W.E. Upjohn Institute for Employment Research. [Downloadable!] (restricted)
  3. Brown, J. David & Earle, John S. & Telegdy, Álmos, 2008. "Employment and Wage Effects of Privatization: Evidence from Hungary, Romania, Russia, and Ukraine," IZA Discussion Papers 3688, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  4. Robert H McGuckin & Sang V Nguyen, 2000. "The Impact of Ownership Changes: A View from Labor Markets," Working Papers 00-02, Center for Economic Studies, U.S. Census Bureau. [Downloadable!]
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  5. Erica Groshen, 1996. "American employer salary surveys and labor economics research: issues and contributions," Research Paper 9604, Federal Reserve Bank of New York. [Downloadable!]
    Other versions:
  6. Kjell Erik Lommerud & Odd Rune Straume & Lars Sorgard, . "Merger Profitability in Unionized Oligopoly," University of California at Santa Barbara, Economics Working Paper Series 10-00, Department of Economics, UC Santa Barbara. [Downloadable!]
    Other versions:
  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). [Downloadable!]
    Other versions:
  8. David N. Margolis, 2006. "Should Employment Authorities Worry About Mergers and Acquisitions?," IZA Discussion Papers 1994, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  9. John S. Earle & Álmos Telegdy, 2007. "Ownership and Wages: Estimating Public-Private and Foreign-Domestic Differentials using LEED from Hungary, 1986-2003," NBER Working Papers 12997, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  10. Anthony P. Thirwall, 1972. "A Cross-Section Study of Population Growth and the Growth of Output and Per Capita Income in a Production Function Framework," Working Papers 406, Princeton University, Department of Economics, Industrial Relations Section.. [Downloadable!]
  11. Younghwan Song, 2009. "Training, Technological Changes, and Displacement," Journal of Labor Research, Springer, vol. 30(3), pages 201-218, September. [Downloadable!] (restricted)
  12. Marianne Bertrand & Sendhil Mullainathan, 1998. "Is There Discretion in Wage Setting? A Test Using Takeover Legislation," NBER Working Papers 6807, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  13. Huck, Steffen & Seltzer, Andrew J. & Wallace, Brian, 2004. "Deferred Compensation and Gift Exchange: An Experimental Investigation into Multi-Period Labor Markets," IZA Discussion Papers 1193, Institute for the Study of Labor (IZA). [Downloadable!]
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  17. Filippo Ippolito, 2005. "Takeover Defenses, Firm-Specific Skills and Managerial Entrenchment," OFRC Working Papers Series 2005fe13, Oxford Financial Research Centre. [Downloadable!]
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  19. Leora Friedberg & Michael T. Owyang & Tara M. Sinclair, 2006. "Searching for better prospects: endogenizing falling job tenure and private pension coverage," Working Papers 2003-038, Federal Reserve Bank of St. Louis. [Downloadable!]
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  20. David Neumark, 2001. "Age Discrimination Legislation in the United States," NBER Working Papers 8152, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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