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Hard Marriage with Heavy Burdens: Organized Labor as Takeover Deterrents
[Length of service and layoffs in union and non-union work groups]

Author

Listed:
  • Xuan Tian
  • Wenyu Wang

Abstract

We examine how labor power affects a firm’s takeover exposure and merger gains. Using a regression discontinuity design that relies on “locally” exogenous variation in labor power generated by close-call union elections, we find that increased labor power significantly reduces a firm’s takeover exposure, reduces target offer premium and announcement returns, and prolongs deal completion duration. The results are stronger for more powerful and conflict-provoking unions. Bidders of unionized targets are experienced, are tough negotiators, and face fewer union threats by themselves. Our paper provides new insights into the real effects of shareholder-employee conflict regarding the market for corporate control. (JEL G34, G30, J51)Received: February 9, 2019; editorial decision January 15, 2020 by Editor Isil Erel. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

Suggested Citation

  • Xuan Tian & Wenyu Wang, 2021. "Hard Marriage with Heavy Burdens: Organized Labor as Takeover Deterrents [Length of service and layoffs in union and non-union work groups]," The Review of Corporate Finance Studies, Society for Financial Studies, vol. 10(2), pages 306-346.
    • Handle: RePEc:oup:rcorpf:v:10:y:2021:i:2:p:306-346.
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    File URL: http://hdl.handle.net/10.1093/rcfs/cfaa002
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    Cited by:

    1. Najlaa Kallousa & Youngki Jang & Boochun Jung & Hussein Warsame, 2023. "Labor unions and post‐acquisition integration capability: Evidence from goodwill impairment," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 50(3-4), pages 764-794, March.
    2. Andres, Christian & Bazhutov, Dmitry & Cumming, Douglas J. & Limbach, Peter, 2021. "Does Speculative News Hurt Productivity? Evidence from Takeover Rumors," CFR Working Papers 21-02, University of Cologne, Centre for Financial Research (CFR), revised 2021.

    More about this item

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects

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