Employee Rights and Acquisitions

Kose John
New York University (NYU) – Department of Finance

Anzhela Knyazeva
U.S. Securities and Exchange Commission

Diana Knyazeva
U.S. Securities and Exchange Commission (SEC)

October 2015

Journal of Financial Economics, Vol. 118, Issue 1, pp. 49-69


This paper examines the outcomes and characteristics of corporate acquisitions from the perspective of stakeholder-shareholder agency conflicts. Using state variation in labor protections, we find that acquirers with strong labor rights experience lower announcement returns. Combined acquirer and target announcement returns are also lower in the presence of strong labor rights. Our findings remain statistically and economically significant after we control for a range of deal, firm, industry and state characteristics and explore various channels for the labor rights effect. Overall, the evidence indicates that employee-shareholder conflicts of interest reduce shareholder gains from acquisitions.

Employee Rights and Acquisitions

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