Corporate M&As and labor market concentration: Efficiency gains or power grabs?

101 Pages Posted: 22 Dec 2021 Last revised: 30 Jun 2024

See all articles by David C. Cicero

David C. Cicero

Harbert College of Business, Auburn University

Mo Shen

Harbert College of Business, Auburn University

Jaideep Shenoy

University of Connecticut - Department of Finance

Date Written: June 19, 2024

Abstract

Mergers of firms that share labor markets can increase labor market concentration and lead to labor efficiency gains and/or allow the merged firms to exercise labor market power. Using a novel measure based on establishment-level employment data, we find that merger-induced increases in labor market concentration predict merger firm pair formation and explain value creation in a sample of completed U.S. public firm mergers from 1991 to 2016. A labor efficiency explanation for these gains is supported by the stock market reactions of rival, supplier, and customer firms, as well as firm-and establishment-level real effects in the merging firms.

Keywords: JEL classification: G30, G34, J24, K21, L40 Labor market concentration, Mergers & Acquisitions, Value creation, Labor efficiency vs. Labor market power channels, Product market effects ______________________________________________________________________________

JEL Classification: G30, G34, J24, K21, L40

Suggested Citation

Cicero, David C. and Shen, Mo and Shenoy, Jaideep, Corporate M&As and labor market concentration: Efficiency gains or power grabs? (June 19, 2024). University of Connecticut School of Business Research Paper No. 22-05, Available at SSRN: https://ssrn.com/abstract=3990297 or http://dx.doi.org/10.2139/ssrn.3990297

David C. Cicero

Harbert College of Business, Auburn University ( email )

415 Magnolia Ave.
Auburn, AL 36849
United States

Mo Shen (Contact Author)

Harbert College of Business, Auburn University ( email )

405 West Magnolia Ave
Auburn, AL 36849
United States

Jaideep Shenoy

University of Connecticut - Department of Finance ( email )

School of Business
2100 Hillside Road
Storrs, CT 06269
United States

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