IDEAS home Printed from https://ideas.repec.org/a/tpr/restat/v77y1995i3p470-85.html
   My bibliography  Save this article

Do Hostile Takeovers Reduce Extramarginal Wage Payments?

Author

Listed:
  • Gokhale, Jagadeesh
  • Groshen, Erica L
  • Neumark, David

Abstract

We study the relationship between proxies for extramarginal wage payments and subsequent hostile takeover activity, and find little evidence that the takeovers are motivated by the expropriation of extramarginal wages. Then, using data on wage and employment structures both before and after takeovers, we investigate whether proxies for extramarginal wage payments drop after hostile takeovers. The ex post experiments provide evidence consistent with one version of the expropriation hypothesis. Although our findings do not suggest that hostile takeovers reduce workers' shares of rents, such takeovers do appear to reduce extra marginal wage payments to more-tenured workers in two ways: first, by reducing employment of more-senior workers; and second, by flattening wage-seniority profiles in firms or establishments with relatively senior work forces. Copyright 1995 by MIT Press.

Suggested Citation

  • 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.
  • Handle: RePEc:tpr:restat:v:77:y:1995:i:3:p:470-85
    as

    Download full text from publisher

    File URL: http://links.jstor.org/sici?sici=0034-6535%28199508%2977%3A3%3C470%3ADHTREW%3E2.0.CO%3B2-5&origin=bc
    File Function: full text
    Download Restriction: Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Steven N. Kaplan & Jeremy C. Stein, 1991. "The Evolution of Buyout Pricing and Financial Structure," NBER Working Papers 3695, National Bureau of Economic Research, Inc.
    2. Jeffrey Pontiff & Andrei Shleifer & Michael S. Weisbach, 1990. "Reversions of Excess Pension Assets after Takeovers," RAND Journal of Economics, The RAND Corporation, vol. 21(4), pages 600-613, Winter.
    3. James L. Medoff & Katharine G. Abraham, 1981. "Are Those Paid More Really More Productive? The Case of Experience," Journal of Human Resources, University of Wisconsin Press, vol. 16(2), pages 186-216.
    4. Loewenstein, George F & Sicherman, Nachum, 1991. "Do Workers Prefer Increasing Wage Profiles?," Journal of Labor Economics, University of Chicago Press, vol. 9(1), pages 67-84, January.
    5. McKinley Blackburn & David Neumark, 1992. "Unobserved Ability, Efficiency Wages, and Interindustry Wage Differentials," The Quarterly Journal of Economics, Oxford University Press, vol. 107(4), pages 1421-1436.
    6. Laurence J. Kotlikoff & David A. Wise, 1985. "Labor Compensation and the Structure of Private Pension Plans: Evidence for Contractual versus Spot Labor Markets," NBER Chapters,in: Pensions, Labor, and Individual Choice, pages 55-88 National Bureau of Economic Research, Inc.
    7. Amar Bhide, 1989. "The Causes And Consequences Of Hostile Takeovers," Journal of Applied Corporate Finance, Morgan Stanley, vol. 2(2), pages 36-59.
    8. Brown, James N, 1989. "Why Do Wages Increase with Tenure? On-the-Job Training and Life-Cycle Wage Growth Observed within Firms," American Economic Review, American Economic Association, vol. 79(5), pages 971-991, December.
    9. Rosett, Joshua G., 1990. "Do union wealth concessions explain takeover premiums? : The evidence on contract wages," Journal of Financial Economics, Elsevier, vol. 27(1), pages 263-282, September.
    10. Andrei Shleifer & Lawrence H. Summers, 1988. "Breach of Trust in Hostile Takeovers," NBER Chapters,in: Corporate Takeovers: Causes and Consequences, pages 33-68 National Bureau of Economic Research, Inc.
    11. Charles Brown & James L. Medoff, 1988. "The Impact of Firm Acquisitions on Labor," NBER Chapters,in: Corporate Takeovers: Causes and Consequences, pages 9-32 National Bureau of Economic Research, Inc.
    12. David Neumark & Steven A. Sharpe, 1992. "Hostile takeovers and expropriation of extramarginal wages: a test," Finance and Economics Discussion Series 197, Board of Governors of the Federal Reserve System (U.S.).
    13. George A. Akerlof, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, Oxford University Press, vol. 97(4), pages 543-569.
    14. Lichtenberg, F.R. & Siegel, D., 1989. "The Effect Of Takeovers On The Employment And Wages Of Central-Office And Other Personnel," Papers fb-_89-05, Columbia - Graduate School of Business.
    15. Robert Gibbons & Lawrence Katz, 1992. "Does Unmeasured Ability Explain Inter-Industry Wage Differentials?," Review of Economic Studies, Oxford University Press, vol. 59(3), pages 515-535.
    16. David Neumark & Michael L. Wachter, 1992. "Union Threat Effects and Nonunion Industry Wage Differentials," NBER Working Papers 4046, National Bureau of Economic Research, Inc.
    17. Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, vol. 56(2), pages 259-293, March.
    18. William T. Dickens & Lawrence F. Katz, 1987. "Inter-Industry Wage Differences and Theories of Wage Determination," NBER Working Papers 2271, National Bureau of Economic Research, Inc.
    19. Lorne Carmichael, 1983. "Firm-Specific Human Capital and Promotion Ladders," Bell Journal of Economics, The RAND Corporation, vol. 14(1), pages 251-258, Spring.
    20. Lazear, Edward P, 1979. "Why Is There Mandatory Retirement?," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1261-1284, December.
    21. Edward P. Lazear & Robert L. Moore, 1984. "Incentives, Productivity, and Labor Contracts," The Quarterly Journal of Economics, Oxford University Press, vol. 99(2), pages 275-296.
    22. Erica L. Groshen, 1991. "Rising inequality in a salary survey: another piece of the puzzle," Working Paper 9121, Federal Reserve Bank of Cleveland.
    23. William T. Dickens & Lawrence F. Katz, 1986. "Interindustry Wage Differences and Industry Characteristics," NBER Working Papers 2014, National Bureau of Economic Research, Inc.
    24. David Neumark, 1992. "Are Rising Wage Profiles a Forced-Saving Mechanism?," NBER Working Papers 4213, National Bureau of Economic Research, Inc.
    25. Erica L. Groshen, 1991. "Sources of Intra-Industry Wage Dispersion: How Much Do Employers Matter?," The Quarterly Journal of Economics, Oxford University Press, vol. 106(3), pages 869-884.
    26. Levine, David I, 1993. "Fairness, Markets, and Ability to Pay: Evidence from Compensation Executives," American Economic Review, American Economic Association, vol. 83(5), pages 1241-1259, December.
    27. Mitchell A. Petersen, 1992. "Pension Reversions and Worker-Stockholder Wealth Transfers," The Quarterly Journal of Economics, Oxford University Press, vol. 107(3), pages 1033-1056.
    Full references (including those not matched with items on IDEAS)

    More about this item

    JEL classification:

    • D20 - Microeconomics - - Production and Organizations - - - General
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tpr:restat:v:77:y:1995:i:3:p:470-85. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kristin Waites). General contact details of provider: http://mitpress.mit.edu/journals/ .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.