Workforce reductions and post-merger operating performance: The role of corporate governance

Kamran Malikov, Mehmet Demirbag, Azimjon Kuvandikov and Stuart Manson

Journal of Business Research, 2021, vol. 122, issue C, 109-120

Abstract: This paper examines whether corporate governance mechanisms influence the association between workforce reductions and post-acquisition operating performance. Using UK-based acquisitions, it is found that there is a negative relationship between employment reductions and post-acquisition operating performance. However, the results show that this negative association becomes positive when the board has a substantial equity ownership. This suggests acquirers with higher levels of board ownership make better quality layoff decisions and, thereby, achieve operating performance improvement subsequent to workforce reductions. The results also indicate that larger board size and greater board independence decrease the negative effect of acquisition-related workforce reductions on subsequent operating performance. Further, our results show that CEO duality increases the negative relationship between employment reductions and post-acquisition operating performance. Overall, the results suggest that corporate governance plays an important role in understanding the performance effect of acquisition-related workforce reductions.

Keywords: Workforce reductions; Post-acquisition operating performance; Corporate governance; Merger and acquisition (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbrese:v:122:y:2021:i:c:p:109-120

DOI: 10.1016/j.jbusres.2020.08.042

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