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Determinants of layoff announcements following M&As: an empirical investigation
Author(s) -
O'Shaughnessy K. C.,
Flanagan David J.
Publication year - 1998
Publication title -
strategic management journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 11.035
H-Index - 286
eISSN - 1097-0266
pISSN - 0143-2095
DOI - 10.1002/(sici)1097-0266(199810)19:10<989::aid-smj994>3.0.co;2-3
Subject(s) - layoff , sample (material) , mergers and acquisitions , business , database transaction , revenue , economics , finance , unemployment , computer science , economic growth , chemistry , chromatography , programming language
It is often argued that mergers and acquisitions (M&As) lead to employee layoffs. This paper examines factors that influence the probability that a layoff announcement will follow an M&A. A sample of 136 large M&As, involving U.S. targets, that occurred between 1989 and 1993 is analyzed. Analyses of this sample indicate that the probability of a layoff announcement is higher if the firms involved in the transaction are related. The probability that a layoff will be announced was not changed when the acquirer was a non‐U.S. firm (cross‐border transactions). Target revenue per employee before the M&A is negatively related to the probability that a layoff was announced. Target financial performance prior to the transaction and use of borrowed funds to finance the merger were not found to have an impact on the probability that a layoff will be announced. © 1998 John Wiley & Sons, Ltd.