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Employee rights and acquisitions

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  • John, Kose
  • Knyazeva, Anzhela
  • Knyazeva, Diana

Abstract

This paper examines the outcomes and characteristics of corporate acquisitions from the perspective of stakeholder-shareholder agency conflicts. Using state variation in labor protections, we find that acquirers with strong labor rights experience lower announcement returns. Combined acquirer and target announcement returns are also lower in the presence of strong labor rights. Our findings remain statistically and economically significant after we control for a range of deal, firm, industry and state characteristics and explore various channels for the labor rights effect. Overall, the evidence indicates that employee-shareholder conflicts of interest reduce shareholder gains from acquisitions.

Suggested Citation

  • John, Kose & Knyazeva, Anzhela & Knyazeva, Diana, 2015. "Employee rights and acquisitions," Journal of Financial Economics, Elsevier, vol. 118(1), pages 49-69.
  • Handle: RePEc:eee:jfinec:v:118:y:2015:i:1:p:49-69
    DOI: 10.1016/j.jfineco.2015.06.001
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Keishi Fujiyama & Makoto Kuroki, 2017. "Employee Downsizing and Accounting Choices: Evidence from Japan," Discussion Paper Series DP2017-06, Research Institute for Economics & Business Administration, Kobe University, revised Sep 2017.
    2. repec:uts:finphd:4-2018 is not listed on IDEAS
    3. repec:eee:jbfina:v:99:y:2019:i:c:p:21-44 is not listed on IDEAS
    4. Brett W. Myers & Alessio Saretto, 2016. "Does Capital Structure Affect the Behavior of Nonfinancial Stakeholders? An Empirical Investigation into Leverage and Union Strikes," Management Science, INFORMS, vol. 62(11), pages 3235-3253, November.
    5. repec:eee:jfinec:v:125:y:2017:i:2:p:369-388 is not listed on IDEAS
    6. Laurent Frésard & Ulrich Hege & Gordon Phillips, 2017. "Extending Industry Specialization through Cross-Border Acquisitions," Review of Financial Studies, Society for Financial Studies, vol. 30(5), pages 1539-1582.
    7. Chino, Atsushi, 2016. "Do labor unions affect firm payout policy?: Operating leverage and rent extraction effects," Journal of Corporate Finance, Elsevier, vol. 41(C), pages 156-178.
    8. Liang, H. & Renneboog, Luc & Vansteenkiste, Cara, 2017. "Corporate Employee-Engagement and Merger Outcomes," Discussion Paper 2017-011, Tilburg University, Center for Economic Research.
    9. Liang, Hao & Renneboog, Luc & Vansteenkiste, Cara, 2017. "Cross-Border Acquisitions and Employee-Engagement," Discussion Paper 2017-038, Tilburg University, Center for Economic Research.
    10. Zhenxu Tong, 2015. "Labor Unions and Forms of Corporate Liquidity," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 42(7-8), pages 1007-1039, September.
    11. repec:eee:jbfina:v:88:y:2018:i:c:p:408-422 is not listed on IDEAS
    12. repec:eee:jfinec:v:129:y:2018:i:1:p:111-135 is not listed on IDEAS
    13. Filipovic, Zoran & Wagner, Alexander F, 2019. "The Intangibles Song in Takeover Announcements: Good Tempo, Hollow Tune," CEPR Discussion Papers 13560, C.E.P.R. Discussion Papers.
    14. repec:eee:quaeco:v:69:y:2018:i:c:p:174-187 is not listed on IDEAS
    15. Ross Levine & Chen Lin & Beibei Shen, 2015. "Cross-border Acquisitions and Labor Regulations," NBER Working Papers 21245, National Bureau of Economic Research, Inc.
    16. Jie (Jack) He & Tao Shu & Huan Yang, 2018. "The Employee Clientele of Corporate Leverage: Evidence from Personal Labor Income Diversification," Working Papers 18-01, Center for Economic Studies, U.S. Census Bureau.

    More about this item

    Keywords

    Mergers and acquisitions; Firm value; Employees; Agency conflicts;

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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