Corporate M&As and Labor Market Concentration: Efficiency Gains or Power Grabs?

68 Pages Posted: 22 Dec 2021 Last revised: 24 Jan 2023

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: January 23, 2023

Abstract

We study how the merger-induced increase in labor market concentration affects value creation in corporate M&As. Using a novel measure based on establishment-level employment data, we find that the merger-induced increase in labor market concentration predicts merger firm pair formation and explains value creation for merging firms. A labor efficiency explanation is supported by the stock market reactions for rival, supplier, and customer firms, as well as firm- and establishment-level real effects in merged firms. Overall, mergers that increase labor market concentration appear to create value through efficient post-merger labor reorganization rather than exploitation of labor market power vis-à-vis employees.

Keywords: 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? (January 23, 2023). 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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