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Assessing the Effects of Mergers and Acquisitions on Firm Performance, Plant Productivity, and Workers: New Evidence from Matched Employer-Employee Data

Donald S. Siegel () and Kenneth L. Simons

Rensselaer Working Papers in Economics from Rensselaer Polytechnic Institute, Department of Economics

Abstract: Studies of the effects of mergers and acquisitions focus on a single unit of analysis: firms, plants, or workers. In contrast, we model these events as transactions that simultaneously have cross-levels effects. Based on the theory of human capital, we generate a set of predictions regarding the antecedents and consequences of firm, plant, and worker turnover. Our empirical analysis is based on longitudinal, linked employer-employee data for virtually the entire population of Swedish manufacturing firms and employees for the period 1985-1998. These data allow us to assess the effects of mergers and acquisitions on firm performance, plant productivity, levels of employment, and compensation. Consistent with human capital theory, we find that mergers and acquisitions lead to improvements in firm performance and plant productivity, although they also result in the downsizing of establishments and firms. These transactions also appear to enhance the careers of workers because they provide a mechanism for improving the sorting and matching or workers and managers to firms and industries that best suit their skills.

JEL-codes: G34 D24 C81 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-eff, nep-fin and nep-tid
Date: 2006-01
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