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Implicit contracts and acquisitions: An econometric case study of the nineteenth century Australian banking industry

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  • Andrew J. Seltzer

Abstract

It has been argued that hostile takeovers redistribute wealth from workers to shareholders by enabling the acquiring firm to revoke implicit contracts. This paper uses micro-data from personnel records to examine the consequences of the Union Bank of Australia’s 1892 takeover of the Bank of South Australia. The evidence confirms that the lifetime earnings of older workers at the BSA declined because of the merger. They faced a high probability of losing their jobs immediately following the merger, lost specific human capital due to the closure of branches, faced a flatter salary profile over the remainder of their career, and received a reduced pension.

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  • Andrew J. Seltzer, 2016. "Implicit contracts and acquisitions: An econometric case study of the nineteenth century Australian banking industry," CEH Discussion Papers 048, Centre for Economic History, Research School of Economics, Australian National University.
  • Handle: RePEc:auu:hpaper:048
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    File URL: https://www.cbe.anu.edu.au/researchpapers/CEH/WP201605.pdf
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    References listed on IDEAS

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    1. Marianne Bertrand & Sendhil Mullainathan, 1999. "Is There a Discretion in Wage Setting? A Test Using Takeover Legislation," RAND Journal of Economics, The RAND Corporation, vol. 30(3), pages 535-554, Autumn.
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    3. Hamilton, Barton & MacKinnon, Mary, 1996. "Long-term employment relationships in the early twentieth century: Evidence from personnel data," Labour Economics, Elsevier, vol. 3(4), pages 357-383, December.
    4. 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.
    5. 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.
    6. Seltzer, Andrew & Merrett, David T, 2000. "Personnel Policies at the Union Bank of Australia: Evidence from the 1888-1900 Entry Cohorts," Journal of Labor Economics, University of Chicago Press, vol. 18(4), pages 573-613, October.
    7. Lazear, Edward P, 1979. "Why Is There Mandatory Retirement?," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1261-1284, December.
    8. Seltzer, Andrew J. & Simons, Kenneth L., 2001. "Salaries and Career Opportunities in the Banking Industry: Evidence from the Personnel Records of the Union Bank of Australia," Explorations in Economic History, Elsevier, vol. 38(2), pages 195-224, April.
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