Private Equity Buyouts and Employee Health

68 Pages Posted: 15 May 2020 Last revised: 18 May 2020

See all articles by Pilar Garcia-Gomez

Pilar Garcia-Gomez

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Ernst G. Maug

University of Mannheim Business School; European Corporate Governance Institute (ECGI)

Stefan Obernberger

Erasmus University Rotterdam - Erasmus School of Economics; Erasmus Research Institute of Management (ERIM)

Date Written: May 13, 2020

Abstract

We examine the role of employee health in Private Equity buyouts using employee-level data on employment, wages, medical prescriptions, and health expenditures.We conduct matched-sample difference-in-differences estimations including more than 55,000 buyout employees. Employees with a lower health status before the buyout face the most substantial losses of income and employment from buyouts, and these losses are predicted by health-related estimates of employees’ productivity. Buyouts influence employees’ career paths, and health outcomes after buyouts are associated with career path outcomes: Those who become unemployed are in poorer health and the health of those who find new jobs is better. More than half of the negative effect of buyouts on employees’ incomes is buffered by social transfers and this insurance effect is strongest for employees in poor health. We conclude that buyout-related restructuring has a stronger negative impact on the careers and human capital of employees with health problems.

Keywords: Private Equity, Buyouts, Restructuring, Health, Human Capital Risk, Wages, Unemployment Insurance

JEL Classification: G30, G34, I12, J65, J24, J31, M51

Suggested Citation

Garcia Gomez, Pilar and Maug, Ernst G. and Obernberger, Stefan, Private Equity Buyouts and Employee Health (May 13, 2020). European Corporate Governance Institute – Finance Working Paper No. 680/2020. Available at SSRN: https://ssrn.com/abstract=3601813

Pilar Garcia Gomez

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

Ernst G. Maug (Contact Author)

University of Mannheim Business School ( email )

L9, 1-2
Mannheim, 68131
Germany
+49 621 181-1952 (Phone)

HOME PAGE: http://cf.bwl.uni-mannheim.de/de/people/maug/

European Corporate Governance Institute (ECGI)

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

Stefan Obernberger

Erasmus University Rotterdam - Erasmus School of Economics ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

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