M&As, Employee Costs and Labor Reallocation

105 Pages Posted: 20 Apr 2020 Last revised: 25 Jan 2023

See all articles by Spyridon Lagaras

Spyridon Lagaras

University of Pittsburgh, Katz Graduate Business School

Date Written: January 24, 2019


Mergers are associated with large and persistent earnings declines for incumbent employees in target firms. Linking employer-employee administrative data with information on merger activity in Brazil, I find the negative effects are entirely concentrated on employees who exit target firms and reflect displacement in the short run and wage declines in the long run. Low-skilled, managerial, and older employees fare worse. Overall, I conclude that mergers are followed by substantial reallocation costs reflecting losses of firm-specific wage premiums, matching inefficiencies, and industry-specific human capital depreciation with employees transitioning to lower-paying firms considered to be of lower productivity and employment value.

Keywords: M&As, Displacement, Labor Mobility, Employer Fixed Effects

JEL Classification: G34, J2, J3

Suggested Citation

Lagaras, Spyridon, M&As, Employee Costs and Labor Reallocation (January 24, 2019). Available at SSRN: https://ssrn.com/abstract=3560620 or http://dx.doi.org/10.2139/ssrn.3560620

Spyridon Lagaras (Contact Author)

University of Pittsburgh, Katz Graduate Business School ( email )

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Pittsburgh, PA Allegheny 15260
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