Corporate Employee-Engagement and Merger Outcomes

CentER Discussion Paper Series No. 2017-011

58 Pages Posted: 14 Mar 2017 Last revised: 26 May 2017

See all articles by Hao Liang

Hao Liang

Singapore Management University - Lee Kong Chian School of Business

Luc Renneboog

Tilburg University - Department of Finance; European Corporate Governance Institute (ECGI); Tilburg Law and Economics Center (TILEC)

Cara Vansteenkiste

UNSW Australia Business School, School of Banking and Finance

Multiple version iconThere are 3 versions of this paper

Date Written: March 9, 2017

Abstract

Extending the theories of employee incentives and inalienability of human capital, we investigate the link between a firm’s engagement in employee issues and the returns to shareholders around mergers and acquisitions (M&As) and analyze an international sample of 4,565 M&A deals from 48 countries. We find that stronger employee-engagement — especially in terms of monetary benefits — by the acquiring firm is positively related to shareholder returns in domestic deals, but this positive effect is attenuated in cross-border deals, whereas workforce diversity, training and development, or health and safety do not affect shareholder value. The attenuating effect of cross-border deals is stronger when uncertainty about post-merger labor integration is higher and when economic nationalism in the target’s country is stronger, consistent with an explanation based on the inalienability of human capital and employment policies. Moreover, we find that most effects of employee-engagement on shareholder returns are driven by the acquirer rather than the target, and that they persist in the long run post-merger.

Keywords: employee-engagement, labor protection, monetary incentives, mergers and acquisitions (M&As)

JEL Classification: G34, M14, J24

Suggested Citation

Liang, Hao and Renneboog, Luc and Vansteenkiste, Cara, Corporate Employee-Engagement and Merger Outcomes (March 9, 2017). CentER Discussion Paper Series No. 2017-011. Available at SSRN: https://ssrn.com/abstract=2932021 or http://dx.doi.org/10.2139/ssrn.2932021

Hao Liang (Contact Author)

Singapore Management University - Lee Kong Chian School of Business ( email )

469 Bukit Timah Road
Singapore 912409
Singapore

HOME PAGE: http://business.smu.edu.sg/faculty/profile/130396/LIANG-Hao

Luc Renneboog

Tilburg University - Department of Finance ( email )

P.O. Box 90153
Warandelaan 2
5000 LE Tilburg
Netherlands
+13 31 466 8210 (Phone)
+13 31 466 2875 (Fax)

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Tilburg Law and Economics Center (TILEC)

Warandelaan 2
Tilburg, 5000 LE
Netherlands

Cara Vansteenkiste

UNSW Australia Business School, School of Banking and Finance ( email )

Sydney, NSW 2052
Australia

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