Do Employees Cheer for Private Equity? The Heterogeneous Effects of Buyouts on Job Quality

Will Gornall (), Oleg R. Gredil (), Sabrina T. Howell (), Xing Liu () and Jason Sockin ()
Additional contact information
Will Gornall: University of British Columbia, Vancouver, British Columbia V6T 1Z4, Canada
Oleg R. Gredil: Tulane University, A.B. Freeman School of Business, New Orleans, Louisiana 70118
Sabrina T. Howell: Stern School of Business, New York University, New York, New York 10012; and National Bureau of Economic Research, Cambridge, Massachusetts 02138
Xing Liu: PBC School of Finance, Tsinghua University, Beijing 100083, China
Jason Sockin: IZA Institute of Labor Economics, 53113 Bonn, Germany; and Center for Economic Studies and Ifo Institute for Economic Research, 81679 Munich, Germany; and School of Industrial and Labor Relations, Cornell University, Ithaca, New York 14853

Management Science, 2025, vol. 71, issue 5, 4287-4317

Abstract: We show that private equity leveraged buyouts reduce perceived job quality despite not impacting average base pay. This appears to reflect employees bearing more risk. Both job quality and employee incentive pay are more related to firm performance at private equity-owned companies than at public control firms with 1% higher deal rate of return associated with 0.7% more employee incentive pay. Deals with high leverage and employees with worse outside options fuel the declines in job satisfaction after a buyout. Our results highlight how job quality is tied to job security and how ownership affects employees through mechanisms beyond base pay.

Keywords: private equity; leveraged buyouts; job quality; corporate culture; implicit contracts (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://dx.doi.org/10.1287/mnsc.2022.00951 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:71:y:2025:i:5:p:4287-4317

Access Statistics for this article

More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().