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Do Employees Cheer for Private Equity? The Heterogeneous Effects of Buyouts on Job Quality

Author

Listed:
  • Will Gornall

    (University of British Columbia, Vancouver, British Columbia V6T 1Z4, Canada)

  • Oleg R. Gredil

    (Tulane University, A.B. Freeman School of Business, New Orleans, Louisiana 70118)

  • Sabrina T. Howell

    (Stern School of Business, New York University, New York, New York 10012; and National Bureau of Economic Research, Cambridge, Massachusetts 02138)

  • Xing Liu

    (PBC School of Finance, Tsinghua University, Beijing 100083, China)

  • Jason Sockin

    (IZA Institute of Labor Economics, 53113 Bonn, Germany; and Center for Economic Studies and Ifo Institute for Economic Research, 81679 Munich, Germany; and School of Industrial and Labor Relations, Cornell University, Ithaca, New York 14853)

Abstract

We show that private equity leveraged buyouts reduce perceived job quality despite not impacting average base pay. This appears to reflect employees bearing more risk. Both job quality and employee incentive pay are more related to firm performance at private equity-owned companies than at public control firms with 1% higher deal rate of return associated with 0.7% more employee incentive pay. Deals with high leverage and employees with worse outside options fuel the declines in job satisfaction after a buyout. Our results highlight how job quality is tied to job security and how ownership affects employees through mechanisms beyond base pay.

Suggested Citation

  • Will Gornall & Oleg R. Gredil & Sabrina T. Howell & Xing Liu & Jason Sockin, 2025. "Do Employees Cheer for Private Equity? The Heterogeneous Effects of Buyouts on Job Quality," Management Science, INFORMS, vol. 71(5), pages 4287-4317, May.
    • Handle: RePEc:inm:ormnsc:v:71:y:2025:i:5:p:4287-4317
    DOI: 10.1287/mnsc.2022.00951
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