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Employment Protection and Takeovers

Dessaint, O., Golubov, A. & Volpin, P. (2017). Employment Protection and Takeovers. Journal of Financial Economics, 125(2), pp. 369-388. doi: 10.1016/j.jfineco.2017.05.005


Labor restructuring is a key driver of takeovers and the associated synergy gains worldwide. In a difference-in-differences research design, we show that major increases in employment protection reduce takeover activity by 14-27% and the combined firm gains (synergies) by over half. Consistent with the labor channel behind these effects, deals with greater potential for workforce restructuring show a greater reduction in volume, number, and synergies. The reforms do impede layoffs, and the associated wage costs match the magnitude of synergy losses. Offer prices are not fully adjusted, with both bidders and targets exhibiting lower returns following the reforms.

Publication Type: Article
Additional Information: © 2017, Elsevier. Licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International
Publisher Keywords: Employment Protection, Takeovers, Mergers and Acquisitions, SynergyGains, Premiums, Efficiency
Subjects: H Social Sciences > HG Finance
Departments: Bayes Business School > Finance
SWORD Depositor:
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Available under License Creative Commons Attribution Non-commercial No Derivatives.

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