Employee Rights and Acquisitions

Labor Rights, Venture Capital, and Firm Performance

“…VCs are controlling shareholders with powerful voting rights. Such shareholders are more likely to expropriate employees by paying lower wages, reducing workers’ benefits, or increasing working hours (Atanassov and Kim, ; John et al., ). These constraints work against the primary objectives of labor unions, which have bargaining power.…”

“…The confrontation is a natural reflection of the fact that labor unions provide employees bargaining power and VCs typically are controlling shareholders. When both parties are powerful, the usual conflict between shareholders and employees could become even more pronounced (John, Knyazeva, and Knyazeva, ), which makes it difficult for the manager to balance interests and set priorities (Tirole, ). Thus, the interaction between VCs and unions could hamper the efficiency of the firm, and as a result, the joint effect could be more negative or less positive than either individual effect.…”

Will I Get Paid? Employee Stock Options and Mergers and Acquisitions

“…More recent literature that studies friendly M&A deals finds mixed results on the effect of M&As on employee wages (Li (2013), Ma, Ouimet, and Simintzi (2018)). Also related to our work are recent articles that analyze how labor protection laws affect the takeover activity and gains to shareholders in M&As (John, Knyazeva, and Knyazeva (2015), Dessaint, Golubov, and Volpin (2017)). We contribute to this literature by documenting how the ESO compensation is changed in M&As and by showing that it can be a source of takeover gains.…”

Union Concessions following Asset Sales and Takeovers

“…Finally, we contribute to the literature that examines the effect of labor laws on corporate restructuring, including Atanassov and Kim (2009), John, Knyazeva, and Knyazeva (2015), Levine, Lin, and Shen (2015), and Dessaint, Golubov, and Volpin (2017). Atanassov and Kim (2009) examine management turnover, layoffs, and asset sales in firms at the onset of declining performance.…”

“…Furthermore, we find that protective union laws intensify the effect that union presence and union wages have on both the frequency and wealth creation of asset sales. John et al (2015) argue that strong labor rights intensify the conflict between employees and shareholders, resulting in takeovers that are more labor-friendly and generate lower gains for shareholders. They report that takeovers by acquirers in states with weak labor rights are associated with higher announcement returns.…”