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

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in total mergers and acquisitions (M&A) dollar volume and average M&A size as well as an immediate increase in withdrawn deals.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...

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Bibliographic Details
Published in:Journal of banking & finance 2021-07, Vol.128, p.106139, Article 106139
Main Authors: Chatt, Robert, Gustafson, Matthew, Welker, Adam
Format: Article
Language:English
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Summary: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in total mergers and acquisitions (M&A) dollar volume and average M&A size as well as an immediate increase in withdrawn deals.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.
ISSN:0378-4266
1872-6372
DOI:10.1016/j.jbankfin.2021.106139