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

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  • Chatt, Robert
  • Gustafson, Matthew
  • Welker, Adam

Abstract

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in total mergers and acquisitions (M&A) dollar volume and average M&A size as well as an immediate increase in withdrawn deals.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

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  • Chatt, Robert & Gustafson, Matthew & Welker, Adam, 2021. "Firing frictions and the U.S. mergers and acquisitions market," Journal of Banking & Finance, Elsevier, vol. 128(C).
    • Handle: RePEc:eee:jbfina:v:128:y:2021:i:c:s0378426621000972
    DOI: 10.1016/j.jbankfin.2021.106139
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    1. Tang, Haodan & Fang, Senhui & Jiang, Dianchun, 2022. "The market value effect of digital mergers and acquisitions: Evidence from China," Economic Modelling, Elsevier, vol. 116(C).

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