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Do Employee Interests Affect Target Board Decisions About Acquisition Offers? Evidence from Changes in Unemployment Insurance

Author

Listed:
  • Lixiong Guo

    (School of Business Administration, University of Mississippi, University, Mississippi 38677)

  • Jing Kong

    (College of Business, University of Michigan, Dearborn, Michigan 48126)

  • Ronald W. Masulis

    (UNSW Business School, University of New South Wales, Sydney, New South Wales 2052, Australia)

Abstract

We explore whether employee interests affect the evaluation of acquisition offers by target boards of directors. Exploiting changes in state unemployment insurance (UI) as sources of exogenous variation in worker unemployment costs, we find that lower unemployment costs increase acquisition activity. The adoption of state constituency statutes strengthens this relation. Boards of target firms having high labor intensity, low short-term institutional ownership, headquartered in low population or high social capital counties, and with female independent directors, more often strongly weight employee interests. Higher UI levels are also associated with larger postacquisition layoffs. Our evidence supports theories rationalizing target boards’ consideration of employee interests.

Suggested Citation

  • Lixiong Guo & Jing Kong & Ronald W. Masulis, 2024. "Do Employee Interests Affect Target Board Decisions About Acquisition Offers? Evidence from Changes in Unemployment Insurance," Management Science, INFORMS, vol. 70(12), pages 8344-8365, December.
    • Handle: RePEc:inm:ormnsc:v:70:y:2024:i:12:p:8344-8365
    DOI: 10.1287/mnsc.2022.01379
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