Hard Marriage with Heavy Burdens: Organized Labor as Takeover Deterrents
Review of Corporate Finance Studies, Forthcoming
59 Pages Posted: 18 Sep 2015 Last revised: 26 Feb 2020
Date Written: February 24, 2020
We examine how labor power affects a firm’s takeover exposure and merger gains. Using a regression discontinuity design that relies on “locally” exogenous variation in labor power generated by close-call union elections, we find that increased labor power significantly reduces a firm’s takeover exposure, reduces target offer premium and announcement returns, and prolongs deal completion duration. The results are stronger when unions are more powerful and conflict-provoking. Bidders of unionized targets are experienced, tough negotiators, and face less union threat by themselves. Our paper provides new insights into the real effects of shareholder-employee conflict regarding the market for corporate control.
Keywords: Takeover exposure; Merger gains; Organized labor; Unions, Shareholder-employee conflict
JEL Classification: G34, G30, J51
Suggested Citation: Suggested Citation