Working Paper: NBER ID: w31866
Authors: David Arnold; Kevin S. Milligan; Terry Moon; Amirhossein Tavakoli
Abstract: This paper connects changes in employer characteristics through job transitions to employee earnings following mergers and acquisitions (M&As). Using firm balance sheet data linked to individual earnings data in Canada and a matched difference-in-differences design, we find that after M&As acquirers expand while targets shrink substantially relative to their matched control groups. Additionally, profit margins decrease for both acquirers and targets in the medium run. Furthermore, workers at target firms suffer losses in earnings, and this decline in earnings is entirely driven by workers who move to other firms after an M&A event. We find that workers leaving target firms after M&As move to larger firms with higher wage premiums, but with much worse match qualities on average. Taken together, it appears that job transitions to employers with poor match qualities primarily explain the post-M&A decline in worker earnings in our setting.
Keywords: mergers and acquisitions; employee earnings; job transitions; firm performance; labor market impacts
JEL Codes: E21; G34; J31; J42; L25
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Mergers and acquisitions (MAs) (G34) | Employee earnings (J31) |
| Mergers and acquisitions (MAs) (G34) | Employment at acquiring firms (M51) |
| Mergers and acquisitions (MAs) (G34) | Revenue at acquiring firms (G34) |
| Mergers and acquisitions (MAs) (G34) | Employment at target firms (M51) |
| Mergers and acquisitions (MAs) (G34) | Payroll at target firms (J33) |
| Mergers and acquisitions (MAs) (G34) | Total revenue at target firms (L21) |
| Job transitions from target firms (J62) | Earnings losses for workers (J39) |
| Worker tenure at original firms (J63) | Earnings losses after MAs (J17) |
| Quality of match (L15) | Earnings losses after MAs (J17) |