Labor Market Regulations and Cross-Border Mergers
City University of Hong Kong
Janury 30, 2013
Asian Finance Association (AsFA) 2013 Conference
This paper studies the role of national laws that protect employment in cross-border merger decisions and the merger valuation effects. Using a sample of 53,583 cross-border deals involving firms from 28 countries, I find that firms in countries with stringent labor laws are more likely to be acquired by foreign acquirers, especially acquirers from countries with relatively more flexible labor regulations. The merger premium is higher if an acquirer comes from more flexible and a target comes from more stringent labor regulation environments. The role of labor regulation differences is more important in innovation-intensive sectors. The results are consistent with the hypothesis that more labor protective laws play a facilitating role in cross‐border deals because such laws create an important comparative edge in innovation output.
Number of Pages in PDF File: 36
Keywords: labor laws, cross-border mergers, innovation, law and finance
JEL Classification: F21, G15, G34, J8, K31
Date posted: May 10, 2013
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