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An Examination of Takeovers, Job Loss and the Wage Decline within UK Industry

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  • Til Beckmann
  • William Forbes

Abstract

This paper investigates the effects of takeovers on workers’ employment prospects and wages in the UK for the years 1987–1995. We address directly the idea that takeovers involve a ‘breach of trust’ with employees. Our results provide no support for the breach of trust hypothesis and rather suggest shareholders and workers in the post‐acquisition joint entity are locked in a form of ‘equal misery’ following the execution of the takeover. There already an exist a wide range of event studies documenting the effect of takeovers on shareholders and a smaller number of studies discussing the impact of takeovers on employees. The contribution of the present study is to relate the separate effects of acquisition on these two groups to each other. By doing so we seek to test directly the proposition that takeovers reallocate rents from workers to target shareholders, via the bid‐premia paid on acquisition.

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  • Til Beckmann & William Forbes, 2004. "An Examination of Takeovers, Job Loss and the Wage Decline within UK Industry," European Financial Management, European Financial Management Association, vol. 10(1), pages 141-165, March.
    • Handle: RePEc:bla:eufman:v:10:y:2004:i:1:p:141-165
    DOI: 10.1111/j.1468-036X.2004.00243.x
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    Cited by:

    1. Hiroyuki Taguchi & Taichi Yanagawa & Masashi Harita, 2012. "Impact of M&A on the Employment in Japanese Companies," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 8(5), pages 581-608, November.
    2. David Hillier & Andrew Marshall & Patrick McColgan & Samwel Werema, 2007. "Employee Layoffs, Shareholder Wealth and Firm Performance: Evidence from the UK," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 34(3‐4), pages 467-494, April.
    3. Azimjon Kuvandikov & Andrew Pendleton & David Higgins, 2014. "Employment Change after Takeovers: The Role of Executive Ownership," British Journal of Industrial Relations, London School of Economics, vol. 52(2), pages 191-236, June.
    4. Sumit K. Majumdar & Rabih Moussawi & Ulku Yaylacicegi, 2019. "Mergers and Wages in Digital Networks: a Public Interest Perspective," Journal of Industry, Competition and Trade, Springer, vol. 19(4), pages 583-615, December.
    5. Dong‐Hun Kim, 2010. "Making or Breaking a Deal: the Impact of Electoral Systems on Mergers & Acquisitions," Kyklos, Wiley Blackwell, vol. 63(3), pages 432-449, August.
    6. Kubo, Katsuyuki & Saito, Takuji, 2012. "The effect of mergers on employment and wages: Evidence from Japan," Journal of the Japanese and International Economies, Elsevier, vol. 26(2), pages 263-284.

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