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Should Employment Authorities Worry About Mergers and Acquisitions?

  • Margolis, David N.

    ()

    (Paris School of Economics)

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 displaced worker literature are also those who tend to be overrepresented 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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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1994.

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Length: 43 pages
Date of creation: Mar 2006
Date of revision:
Handle: RePEc:iza:izadps:dp1994
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  1. Borenstein, Severin, 1990. "Airline Mergers, Airport Dominance, and Market Power," American Economic Review, American Economic Association, vol. 80(2), pages 400-404, May.
  2. John M. Abowd & Francis Kramarz & David N. Margolis, 1994. "High Wage Workers and High Wage Firms," NBER Working Papers 4917, National Bureau of Economic Research, Inc.
  3. Charles Brown & James L. Medoff, 1987. "The Impact of Firm Acquisitions on Labor," NBER Working Papers 2273, National Bureau of Economic Research, Inc.
  4. Henry G. Manne, 1965. "Mergers and the Market for Corporate Control," Journal of Political Economy, University of Chicago Press, vol. 73, pages 351.
  5. repec:hal:cesptp:halshs-00353897 is not listed on IDEAS
  6. Jensen, Michael C, 1988. "Takeovers: Their Causes and Consequences," Journal of Economic Perspectives, American Economic Association, vol. 2(1), pages 21-48, Winter.
  7. Lazear, Edward P, 1979. "Why Is There Mandatory Retirement?," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1261-84, December.
  8. John G. Matsusaka, 1993. "Takeover Motives during the Conglomerate Merger Wave," RAND Journal of Economics, The RAND Corporation, vol. 24(3), pages 357-379, Autumn.
  9. Henry G. Manne, 1965. "Mergers and the Market for Corporate Control," Journal of Political Economy, University of Chicago Press, vol. 73, pages 110.
  10. Robert Gibbons & Lawrence Katz, 1989. "Layoffs and Lemons," Working Papers 629, Princeton University, Department of Economics, Industrial Relations Section..
  11. Bruce C. Fallick, 1996. "A Review of the Recent Empirical Literature on Displaced Workers," ILR Review, Cornell University, ILR School, vol. 50(1), pages 5-16, October.
  12. Jagadeesh Gokhale & Erica L. Groshen & David Neumark, 1993. "Do Hostile Takeovers Reduce Extramarginal Wage Payments?," NBER Working Papers 4346, National Bureau of Economic Research, Inc.
  13. repec:hal:cesptp:halshs-00353833 is not listed on IDEAS
  14. David N. Margolis, 1995. "Cohort Effects and Returns to Seniority in France," CIRANO Working Papers 95s-46, CIRANO.
  15. Bruce C. Fallick, 1995. "A review of the recent empirical literature on displaced workers," Finance and Economics Discussion Series 95-14, Board of Governors of the Federal Reserve System (U.S.).
  16. Bradley, Michael & Desai, Anand & Kim, E. Han, 1983. "The rationale behind interfirm tender offers : Information or synergy?," Journal of Financial Economics, Elsevier, vol. 11(1-4), pages 183-206, April.
  17. David N. Margolis, 2002. "Licenciements collectifs et délais de reprise d'emploi," Économie et Statistique, Programme National Persée, vol. 351(1), pages 65-85.
  18. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
  19. 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.
  20. repec:hal:cesptp:halshs-00353817 is not listed on IDEAS
  21. repec:hal:cesptp:halshs-00353892 is not listed on IDEAS
  22. Eckbo, B. Espen, 1983. "Horizontal mergers, collusion, and stockholder wealth," Journal of Financial Economics, Elsevier, vol. 11(1-4), pages 241-273, April.
  23. Compte, Olivier & Jenny, Frederic & Rey, Patrick, 2002. "Capacity constraints, mergers and collusion," European Economic Review, Elsevier, vol. 46(1), pages 1-29, January.
  24. Alan J. Auerbach, 1988. "Corporate Takeovers: Causes and Consequences," NBER Books, National Bureau of Economic Research, Inc, number auer88-1, June.
  25. repec:hal:cesptp:halshs-00367281 is not listed on IDEAS
  26. Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-29, May.
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