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Mergers of Equals & Unequals

  • Smeets, Valérie

    ()

    (Department of Economics, Aarhus School of Business)

  • Ierulli, Kathryn

    ()

    (Graduate School of Business)

  • Gibbs, Michael

    ()

    (Graduate School of Business)

We examine the organizational dynamics of integration post merger. Our basic question is whether there is evidence of conflict between employees from the two merging firms. Such conflict can arise for several reasons, including firm-specific human capital, corporate culture, power, or favoritism. We examine this issue using a sample of Danish mergers. The results are consistent with the basic hypothesis. Controlling for other effects, employees from the acquirer fare better than employees from the acquired firm, suggesting that they have greater power in the newly merged hierarchy. As a separate effect, the more that either firm dominates the other in terms of number of employees, the better do its employees fare compared to employees from the other firm. This suggests that majority / minority status is also important to assimilation of workers, much as in ethnic conflicts. Finally, greater overlap of operations decreases turnover. This finding is inconsistent with the view that workers of the two firms may be better substitutes for each other. However, the result and our other findings are consistent with the view that more similar workers (in terms of either firm- or industry-specific human capital) are easier to integrate post merger

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File URL: http://www.hha.dk/nat/wper/06-8_vas.pdf
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Paper provided by University of Aarhus, Aarhus School of Business, Department of Economics in its series Working Papers with number 06-8.

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Length: 36 pages
Date of creation: 01 Jan 2006
Date of revision:
Handle: RePEc:hhs:aareco:2006_008
Contact details of provider: Postal: The Aarhus School of Business, Prismet, Silkeborgvej 2, DK 8000 Aarhus C, Denmark
Phone: +45 89 486396
Fax: +45 8615 5175
Web page: http://www.asb.dk/departments/nat.aspx

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  1. José Garcia Montalvo & Marta Reynal-Querol, 2004. "Ethnic polarization, potential conflict and civil wars," Economics Working Papers 770, Department of Economics and Business, Universitat Pompeu Fabra, revised Mar 2005.
  2. Edward P. Lazear, 1999. "Culture and Language," Journal of Political Economy, University of Chicago Press, vol. 107(S6), pages S95-S126, December.
  3. Marianne Bertrand & Sendhil Mullainathan, 2003. "Enjoying the Quiet Life? Corporate Governance and Managerial Preferences," Journal of Political Economy, University of Chicago Press, vol. 111(5), pages 1043-1075, October.
  4. Francesco Caselli & Wilbur John Coleman II, 2006. "On the theory of ethnic conflict," LSE Research Online Documents on Economics 3561, London School of Economics and Political Science, LSE Library.
  5. Jos� G. Montalvo & Marta Reynal-Querol, 2005. "Ethnic Polarization, Potential Conflict, and Civil Wars," American Economic Review, American Economic Association, vol. 95(3), pages 796-816, June.
  6. Prendergast, Canice & Topel, Robert, 1993. "Discretion and bias in performance evaluation," European Economic Review, Elsevier, vol. 37(2-3), pages 355-365, April.
  7. David Margolis, 2005. "Compensation Policy, Human Resource Management Practices and Takeovers," Working Papers 2005-32, Centre de Recherche en Economie et Statistique.
  8. Francesco Caselli & Wilbur John Coleman II, 2006. "On the Theory of Ethnic Conflict," NBER Working Papers 12125, National Bureau of Economic Research, Inc.
  9. 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.
  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. Prendergast, Canice & Topel, Robert H, 1996. "Favoritism in Organizations," Journal of Political Economy, University of Chicago Press, vol. 104(5), pages 958-78, October.
  12. Alan J. Auerbach, 1988. "Corporate Takeovers: Causes and Consequences," NBER Books, National Bureau of Economic Research, Inc, number auer88-1, December.
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