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Employment Protection and M&A Performance: Evidence from International Data

Kota Iwasaki, Naoshi Ikeda and Kotaro Inoue

Economic Review, 2019, vol. 70, issue 3, 177-199

Abstract: This study empirically examines a hypothesis that, post mergers and acquisitions(M&A)integration, reorganizations and restructurings become difficult when employees of target firms are strongly protected by labor law and regulations in the target countries, affecting both selection of target firms and value creation from the acquisitions. Consistent with the hypothesis, our empirical results show that when employees in the target countries enjoy a strong legal protection, the stock return at the time of deal announcement and the operating performance of the acquirers in the post-acquisition period worsens. The results are robust even when different kinds of indexes of employment protection are used and selection bias of target firms is considered.

JEL-codes: G34 G38 K31 (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:hit:ecorev:v:70:y:2019:i:3:p:177-199

DOI: 10.15057/30486

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