Unemployment Insurance and Takeovers

68 Pages Posted: 28 Jun 2017 Last revised: 1 Feb 2020

See all articles by Lixiong Guo

Lixiong Guo

University of Alabama - Culverhouse College of Business

Jing Kong

Michigan State University - Department of Accounting & Information Systems

Ronald W. Masulis

University of New South Wales, Sydney; European Corporate Governance Institute (ECGI); Financial Research Network (FIRN); National University of Singapore (NUS) - Asian Bureau of Finance and Economic Research (ABFER)

Date Written: January 31, 2020

Abstract

We examine whether unemployment insurance (UI) mitigates shareholder-employee conflicts of interest and improves takeover market efficiency. Exploiting within state changes in UI benefits, we find that increased target state UI benefits raise acquisition likelihoods, expected deal synergies, and gains to both acquirer and target shareholders. UI effects on acquisition likelihood are stronger in highly unionized industries, in firms with concentrated employee ownership, and in firms with employee friendly boards. The passage of directors’ duties laws increases the UI effect on acquisition likelihood. Lastly, increased acquirer state UI benefits raise acquirer returns and their likelihoods of making within-industry acquisitions.

Keywords: Unemployment Insurance, Labor, Takeovers, Mergers and Acquisitions, Synergy, Stakeholders

JEL Classification: G32, G34, G38, J65

Suggested Citation

Guo, Lixiong and Kong, Jing and Masulis, Ronald W., Unemployment Insurance and Takeovers (January 31, 2020). Available at SSRN: https://ssrn.com/abstract=2993206 or http://dx.doi.org/10.2139/ssrn.2993206

Lixiong Guo (Contact Author)

University of Alabama - Culverhouse College of Business ( email )

Culverhouse College of Business
Tuscaloosa, AL 35487-0223
United States

Jing Kong

Michigan State University - Department of Accounting & Information Systems ( email )

270 North Business Complex
East Lansing, MI 48824-1034
United States

Ronald W. Masulis

University of New South Wales, Sydney ( email )

UNSW Business School
High St
Sydney, NSW 2052
Australia
612-9385-5860 (Phone)
612-9385-6347 (Fax)

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

National University of Singapore (NUS) - Asian Bureau of Finance and Economic Research (ABFER) ( email )

BIZ 2 Storey 4, 04-05
1 Business Link
Singapore, 117592
Singapore

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