Unemployment Insurance and Takeovers
68 Pages Posted: 28 Jun 2017 Last revised: 1 Feb 2020
Date Written: January 31, 2020
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: Suggested Citation