Hard Marriage with Heavy Burdens: Organized Labor as Takeover Deterrents

54 Pages Posted: 18 Sep 2015 Last revised: 22 Jul 2016

Xuan Tian

Tsinghua University - PBC School of Finance

Wenyu Wang

Indiana University - Kelley School of Business - Department of Finance

Date Written: July 22, 2016

Abstract

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

Tian, Xuan and Wang, Wenyu, Hard Marriage with Heavy Burdens: Organized Labor as Takeover Deterrents (July 22, 2016). AFA 2015 Boston Meeting; Kelley School of Business Research Paper No. 15-68. Available at SSRN: https://ssrn.com/abstract=2662180 or http://dx.doi.org/10.2139/ssrn.2662180

Xuan Tian

Tsinghua University - PBC School of Finance ( email )

No. 43, Chengfu Road
Haidian District
Beijing 100083
China
+86-10-62794103 (Phone)

HOME PAGE: http://xuantian.info/

Wenyu Wang (Contact Author)

Indiana University - Kelley School of Business - Department of Finance ( email )

1309 E. 10th St.
Bloomington, IN 47405
United States

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