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Determinants of Layoff Announcements Following M&As: An Empirical Investigation

K. C. O'Shaughnessy and David J. Flanagan
Strategic Management Journal
Vol. 19, No. 10 (Oct., 1998), pp. 989-999
Published by: Wiley
Stable URL: http://www.jstor.org/stable/3094173
Page Count: 11
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Determinants of Layoff Announcements Following M&As;: An Empirical Investigation
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Abstract

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.

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