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Assessing the Effects of Mergers and Acquisitions on Firm Performance, Plant Productivity, and Workers: New Evidence from Matched Employer-Employee Data

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  • Donald S. Siegel

    ()
    (Department of Economics, Rensselaer Polytechnic Institute, Troy, NY 12180-3590, USA)

  • Kenneth L. Simons

    ()
    (Department of Economics, Rensselaer Polytechnic Institute, Troy, NY 12180-3590, USA)

Abstract

Studies of the effects of mergers and acquisitions focus on a single unit of analysis: firms, plants, or workers. In contrast, we model these events as transactions that simultaneously have cross-levels effects. Based on the theory of human capital, we generate a set of predictions regarding the antecedents and consequences of firm, plant, and worker turnover. Our empirical analysis is based on longitudinal, linked employer-employee data for virtually the entire population of Swedish manufacturing firms and employees for the period 1985-1998. These data allow us to assess the effects of mergers and acquisitions on firm performance, plant productivity, levels of employment, and compensation. Consistent with human capital theory, we find that mergers and acquisitions lead to improvements in firm performance and plant productivity, although they also result in the downsizing of establishments and firms. These transactions also appear to enhance the careers of workers because they provide a mechanism for improving the sorting and matching or workers and managers to firms and industries that best suit their skills.

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Bibliographic Info

Paper provided by Rensselaer Polytechnic Institute, Department of Economics in its series Rensselaer Working Papers in Economics with number 0601.

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Date of creation: Jan 2006
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Handle: RePEc:rpi:rpiwpe:0601

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  1. Frank R. Lichtenberg & Donald Siegel, 1987. "Productivity and Changes in Ownership of Manufactoring Plants," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 18(3), pages 643-684.
  2. Michael C. Jensen, 1994. "The Modern Industrial Revolution, Exit, And The Failure Of Internal Control Systems," Journal of Applied Corporate Finance, Morgan Stanley, vol. 6(4), pages 4-23.
  3. Conyon, Martin J. & Girma, Sourafel & Thompson, Steve & Wright, Peter W., 2002. "The impact of mergers and acquisitions on company employment in the United Kingdom," European Economic Review, Elsevier, vol. 46(1), pages 31-49, January.
  4. Donald S. Siegel & Kenneth L. Simons & Tomas Lindstrom, 2005. "Ownership Change, Productivity, and Human Capital: New Evidence from Matched Employer-Employee Data in Swedish Manufacturing," Rensselaer Working Papers in Economics 0502, Rensselaer Polytechnic Institute, Department of Economics.
  5. Richard Harris & Donald S. Siegel & Mike Wright, 2005. "Assessing the Impact of Management Buyouts on Economic Efficiency: Plant-Level Evidence from the United Kingdom," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 148-153, February.
  6. McGuckin, Robert H. & Nguyen, Sang V., 2001. "The impact of ownership changes: a view from labor markets," International Journal of Industrial Organization, Elsevier, vol. 19(5), pages 739-762, April.
  7. Martin J. Conyon & Sourafel Girma & Steve Thompson & Peter W. Wright, 2004. "Do Wages Rise or Fall Following Merger?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 66(5), pages 847-862, December.
  8. Jovanovic, Boyan, 1979. "Job Matching and the Theory of Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 972-90, October.
  9. Charles Brown & James L. Medoff, 1987. "The Impact of Firm Acquisitions on Labor," NBER Working Papers 2273, National Bureau of Economic Research, Inc.
  10. Holmes, Thomas J & Schmitz, James A, Jr, 1990. "A Theory of Entrepreneurship and Its Application to the Study of Business Transfers," Journal of Political Economy, University of Chicago Press, vol. 98(2), pages 265-94, April.
  11. Lichtenberg, Frank R & Siegel, Donald, 1990. "The Effect of Ownership Changes on the Employment and Wages of Central Office and Other Personnel," Journal of Law and Economics, University of Chicago Press, vol. 33(2), pages 383-408, October.
  12. Boyan Jovanovic & Peter L. Rousseau, 2002. "Mergers as Reallocation," NBER Working Papers 9279, National Bureau of Economic Research, Inc.
  13. Andrei Shleifer & Lawrence H. Summers, 1987. "Breach of Trust in Hostile Takeovers," NBER Working Papers 2342, National Bureau of Economic Research, Inc.
  14. Mark Doms & Eric J. Bartelsman, 2000. "Understanding Productivity: Lessons from Longitudinal Microdata," Journal of Economic Literature, American Economic Association, vol. 38(3), pages 569-594, September.
  15. Frank R. Lichtenberg & Donald Siegel, 1991. "The Effects of Leveraged Buyouts on Productivity and Related Aspects of Firm Behavior," NBER Working Papers 3022, National Bureau of Economic Research, Inc.
  16. Gugler, Klaus & Yurtoglu, B. Burcin, 2004. "The effects of mergers on company employment in the USA and Europe," International Journal of Industrial Organization, Elsevier, vol. 22(4), pages 481-502, April.
  17. Conyon, Martin J. & Girma, Sourafel & Thompson, Steve & Wright, Peter W., 2001. "Do hostile mergers destroy jobs?," Journal of Economic Behavior & Organization, Elsevier, vol. 45(4), pages 427-440, August.
  18. Peter Cappelli & David Neumark, 2001. "Do "high-performance" work practices improve establishment-level outcomes?," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 54(4), pages 737-775, July.
  19. Donald S. Siegel, 1999. "Skill-Biased Technological Change: Evidence from a Firm-Level Survey," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number sbtc.
  20. Jensen, Michael C, 1988. "Takeovers: Their Causes and Consequences," Journal of Economic Perspectives, American Economic Association, vol. 2(1), pages 21-48, Winter.
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Cited by:
  1. Nicholas Bloom & Christos Genakos & Raffaella Sadun & John Van Reenen, 2011. "Management Practices Across Firms and Countries," CEP Discussion Papers dp1109, Centre for Economic Performance, LSE.
  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. Benjamin Furlan & Harald Oberhofer & Hannes Winner, 2014. "A Note on Merger and Acquisition Evaluation," WIFO Working Papers 462, WIFO.
  4. Foreman-Peck, James & Nicholls, Tom, 2008. "Peripherality and the Impact of SME Takeovers," Cardiff Economics Working Papers E2008/9, Cardiff University, Cardiff Business School, Economics Section, revised Jul 2012.
  5. Lehto, Eero & Böckerman, Petri, 2006. "Enemy of Labour? Analysing the Employment Effects of Mergers and Acquisitions," MPRA Paper 1812, University Library of Munich, Germany.
  6. Pierre-Alexandre Balland & Ron Boschma & Koen Frenken, 2013. "Proximity and Innovation: From Statics to Dynamics," Papers in Evolutionary Economic Geography (PEEG) 1314, Utrecht University, Section of Economic Geography, revised Aug 2013.

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