Do Employee Interests Affect Target Board Decisions About Acquisition Offers? Evidence from Changes in Unemployment Insurance

Lixiong Guo (), Jing Kong () and Ronald Masulis
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Lixiong Guo: School of Business Administration, University of Mississippi, University, Mississippi 38677
Jing Kong: College of Business, University of Michigan, Dearborn, Michigan 48126

Management Science, 2024, vol. 70, issue 12, 8344-8365

Abstract: We explore whether employee interests affect the evaluation of acquisition offers by target boards of directors. Exploiting changes in state unemployment insurance (UI) as sources of exogenous variation in worker unemployment costs, we find that lower unemployment costs increase acquisition activity. The adoption of state constituency statutes strengthens this relation. Boards of target firms having high labor intensity, low short-term institutional ownership, headquartered in low population or high social capital counties, and with female independent directors, more often strongly weight employee interests. Higher UI levels are also associated with larger postacquisition layoffs. Our evidence supports theories rationalizing target boards’ consideration of employee interests.

Keywords: mergers and acquisitions; board of directors; stakeholder orientation; employee interests; unemployment insurance (search for similar items in EconPapers)
Date: 2024
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