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Does speculative news hurt productivity? Evidence from takeover rumors

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  • Andres, Christian
  • Bazhutov, Dmitry
  • Cumming, Douglas J.
  • Limbach, Peter

Abstract

Speculative news on corporate takeovers may hurt productivity because uncertainty and threat of job loss cause anxiety, distraction, and reduced collaboration and morale among employees and managers. Using a panel of OECD-headquartered firms, we show that firm productivity temporarily declines upon announcements of speculative takeover rumors that do not materialize. This productivity dip is more pronounced for targets and for firms in countries with weaker employee rights and less long-term orientation. Abnormal stock returns mirror these results. The evidence fosters our understanding of potential real effects of speculative financial news and the costs of takeover threats.

Suggested Citation

  • Andres, Christian & Bazhutov, Dmitry & Cumming, Douglas J. & Limbach, Peter, 2023. "Does speculative news hurt productivity? Evidence from takeover rumors," CFS Working Paper Series 701, Center for Financial Studies (CFS).
    • Handle: RePEc:zbw:cfswop:701
    DOI: 10.2139/ssrn.4365129
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    More about this item

    Keywords

    Distraction; Employee commitment; Employee rights; Fear of job loss; Productivity; Shareholder wealth; Takeover speculation; Distraction;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • G00 - Financial Economics - - General - - - General
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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