Cross-Border Acquisitions and Labor Regulations

59 Pages Posted: 29 May 2015

See all articles by Ross Levine

Ross Levine

University of California, Berkeley - Haas School of Business; National Bureau of Economic Research (NBER)

Chen Lin

The University of Hong Kong - Faculty of Business and Economics

Beibei Shen

Shanghai University of Finance and Economics

Multiple version iconThere are 2 versions of this paper

Date Written: May 28, 2015

Abstract

Do labor regulations influence the reaction of stock markets and firm profitability to cross-border acquisitions? We discover that acquiring firms enjoy smaller abnormal stock returns and profits when targets are in countries with stronger labor protection regulations, i.e., in countries where laws, regulations, and policies increase the costs to firms of adjusting their workforces. These effects are especially pronounced when the target is in a labor-intensive or high labor-volatility industry. Consistent with labor regulations shaping the success of cross-border deals, we find that firms make fewer and smaller cross-border acquisitions into countries with strong labor regulations.

Keywords: Cross-border mergers and acquisitions, Multinational firms, International business, Labor standards, Labor market regulations

JEL Classification: G34; G38; J8

Suggested Citation

Levine, Ross Eric and Lin, Chen and Shen, Beibei, Cross-Border Acquisitions and Labor Regulations (May 28, 2015). Available at SSRN: https://ssrn.com/abstract=2611645 or http://dx.doi.org/10.2139/ssrn.2611645

Ross Eric Levine (Contact Author)

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Chen Lin

The University of Hong Kong - Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong
China

Beibei Shen

Shanghai University of Finance and Economics ( email )

777 Guoding Road
Shanghai, AK Shanghai 200433
China

Register to save articles to
your library

Register

Paper statistics

Downloads
102
Abstract Views
1,670
rank
238,298
PlumX Metrics