 Employee–management trust and M&A activityLeonce Bargeron, Kenneth Lehn and Jared Smith Journal of Corporate Finance, 2015, vol. 35, issue C, 389-406 Abstract: We examine the relation between the trust that employees have in management and the M&A activity of firms. We measure this trust by using rankings compiled by the Great Place to Work Institute (GPWI) from 1998 to 2011. Although the volume of M&A activity is not significantly different for firms with strong cultures of trust (“SCT firms”) versus other firms, the relative size of acquisitions announced by SCT firms is significantly smaller than the size of acquisitions announced by other firms. Furthermore, when SCT firms announce relatively large acquisitions, bidder returns and the percent change in the combined values of bidders and targets are lower than the corresponding returns for other firms. Finally, when SCT firms make large acquisitions, they are significantly more likely to suffer a loss in their GPWI ranking as compared with other SCT firms. Overall, the results are consistent with the conclusion that the M&A policies of firms are influenced by a culture of trust between employees and management. Keywords: Culture; Trust; Mergers; Acquisitions (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:35:y:2015:i:c:p:389-406 DOI: 10.1016/j.jcorpfin.2015.07.012 Access Statistics for this article Journal of Corporate Finance is currently edited by A. Poulsen and J. Netter More articles in Journal of Corporate Finance from Elsevier |
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