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Should employment authorities worry about mergers and acquisitions?

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  • David Margolis

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Abstract

This paper considers the role mergers and acquisitions have on employment. First, it considers the importance of different aspects of compensation policy and human resource management practices for distinguishing acquired and acquiring firms. Second, it examines which individuals from which firms remain with the newly created entity after the takeover. Using a unique employer-employee linked data set for France, we find that very few observable workforce or compensation characteristics distinguish acquired from acquiring firms ex-ante. Nevertheless, the human resources department seems to be quite active in the post-takeover period, with employees of the acquired firm being less likely to remain with the new entity in the short term after takeover than those of the acquiring firm and with the differences between the two types of firms disappearing after 3 years. The workers with characteristics that tend to be associated with the fastest subsequent job finding in the displaces worker literature are also those who tend to be overreprensented among the individuals who separate from their employer post-takeover. Finally, as both acquired and acquiring firms differ from firms not involved in takeover activity in a similar manner, employment authorities may be able to anticipate the regions in which takeovers are more likely to occur by looking at the financial accounts of firms with particular characteristics that have local establishments.
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Suggested Citation

  • David Margolis, 2006. "Should employment authorities worry about mergers and acquisitions?," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 5(2), pages 167-194, August.
  • Handle: RePEc:spr:portec:v:5:y:2006:i:2:p:167-194
    DOI: 10.1007/s10258-006-0007-4
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    File URL: http://hdl.handle.net/10.1007/s10258-006-0007-4
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    References listed on IDEAS

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    1. repec:hal:journl:halshs-00353897 is not listed on IDEAS
    2. Gokhale, Jagadeesh & Groshen, Erica L & Neumark, David, 1995. "Do Hostile Takeovers Reduce Extramarginal Wage Payments?," The Review of Economics and Statistics, MIT Press, vol. 77(3), pages 470-485, August.
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    Citations

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    Cited by:

    1. 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.
    2. repec:ebl:ecbull:v:30:y:2010:i:1:p:614-623 is not listed on IDEAS
    3. Oliver Budzinski & Jürgen-Peter Kretschmer, 2009. "Horizontal Mergers, Involuntary Unemployment, and Welfare," MAGKS Papers on Economics 200907, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    4. Fabienne Berton & Coralie Perez, 2010. "Démission et licenciements : quels liens avec les changements organisationnels et/ou technologiques des entreprises ?," Working Papers halshs-00648876, HAL.

    More about this item

    Keywords

    Employment; Takeovers; Linked employer–employee data; G34; J21; J23; J31; J63; L29; M51;

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • L29 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Other
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions

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