Do hostile takeovers reduce extramarginal wage payments?

Jagadeesh Gokhale, Erica Groshen and David Neumark

No 9215, Working Papers (Old Series) from Federal Reserve Bank of Cleveland

Abstract: Hostile takeovers may have significant implications for long-term employment contracts if they facilitate the opportunistic expropriation of extramarginal wage payments. We test the expropriation hypothesis by studying the relationship between proxies for extramarginal wage payments and subsequent hostile takeover activity. This paper improves on existing research by using firm- and establishment-level data from a salary survey of employers. In addition, we observe characteristics of wage and employment structures both before and after the occurrence of a hostile takeover and hence can see whether the data are consistent with reductions in extramarginal wage payments following such takeovers. Results from this ex post experiment provide evidence consistent with the hypothesis that hostile takeovers result in reductions of extramarginal wage payments to more-tenured workers, mostly through cutbacks in senior positions at firms with relatively steep wage profiles.

Keywords: Consolidation and merger of corporations; Wages (search for similar items in EconPapers)
Date: 1992
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Citations: View citations in EconPapers (6)

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Related works:
Journal Article: Do Hostile Takeovers Reduce Extramarginal Wage Payments? (1995)
Working Paper: Do Hostile Takeovers Reduce Extramarginal Wage Payments? (1993)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedcwp:9215

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