Mergers and Managers: Manager-Specific Wage Premiums and the Market for Corporate Control

79 Pages Posted: 13 Nov 2019 Last revised: 29 Jun 2022

See all articles by Alex Xi He

Alex Xi He

University of Maryland - Robert H. Smith School of Business

Daniel le Maire

University of Copenhagen

Date Written: June 28, 2022

Abstract

This paper shows that some managers systematically pay higher wages to their workers, and firms headed by these managers are targets of M&As. We use a manager-firm-worker matched dataset covering the entire population of Denmark from 1995 to 2011 to identify manager-specific wage premiums from both worker and manager movements across firms. We find that the identity of managers does matter for wages, and variation in manager-specific wage premiums accounts for a significant part of between-firm wage inequality. Firms with high wage premiums due to generous managers are more likely to be acquired, and experience higher manager turnover and larger wage declines after acquisitions. Manager-specific wage premiums are not correlated with productivity and other firm policies, and seem to stem from managers' traits and fairness views that are shaped by their personal experiences. Our results suggest that the market for corporate control selects managers who pay lower wages and redistributes wealth from workers to shareholders.

Keywords: managerial style, mergers and acquisitions, wages, management, inequality

JEL Classification: G34, G30, J31, J30, M52, J53, D22

Suggested Citation

He, Alex Xi and le Maire, Daniel, Mergers and Managers: Manager-Specific Wage Premiums and the Market for Corporate Control (June 28, 2022). Available at SSRN: https://ssrn.com/abstract=3481262 or http://dx.doi.org/10.2139/ssrn.3481262

Alex Xi He (Contact Author)

University of Maryland - Robert H. Smith School of Business ( email )

College Park, MD 20742-1815
United States

HOME PAGE: http://www.alexxihe.com/

Daniel Le Maire

University of Copenhagen ( email )

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