Cross-border Acquisitions and Labor Regulations

Ross Levine (), Chen Lin and Beibei Shen

No 21245, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Do labor regulations influence the reaction of stock markets and firm profitability to cross-border acquisitions? We discover that acquiring firms enjoy smaller abnormal stock returns and profits when targets are in countries with stronger labor protection regulations, i.e., in countries where laws, regulations, and policies increase the costs to firms of adjusting their workforces. These effects are especially pronounced when the target is in a labor-intensive or high labor-volatility industry. Consistent with labor regulations shaping the success of cross-border deals, we find that firms make fewer and smaller cross-border acquisitions into countries with strong labor regulations.

JEL-codes: F2 G34 G38 J6 J8 (search for similar items in EconPapers)
Date: 2015-06
New Economics Papers: this item is included in nep-bec, nep-int and nep-lab
Note: CF IFM ITI LS
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Citations: View citations in EconPapers (9)

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