Firing frictions and the U.S. mergers and acquisitions market

Robert Chatt, Matthew Gustafson and Adam Welker

Journal of Banking & Finance, 2021, vol. 128, issue C

Abstract: Following the adoption of state laws that increase firing costs, there is an immediate and persistent 30% reduction in total mergers and acquisitions (M&A) dollar volume and average M&A size as well as an immediate increase in withdrawn deals. Firing costs do not affect M&A announcement returns, but there are negative returns surrounding the announcement of state laws that increase firing frictions, especially for future M&A targets. These findings suggest that post-merger employee turnover is a first-order source of value for U.S. mergers.

Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:128:y:2021:i:c:s0378426621000972

DOI: 10.1016/j.jbankfin.2021.106139

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