Assessing the Effects of Mergers and Acquisitions on Firm Performance, Plant Productivity, and Workers: New Evidence from Matched Employer-Employee Data

Abstract

Empirical studies of mergers and acquisitions typically focus on firm-level financial performance. In contrast, we use human capital theory to model these events as transactions that simultaneously have cross-level, real effects on workers, plants, and firms. Our empirical analysis is based on longitudinal, linked employer-employee data for virtually all Swedish manufacturing firms and employees. We find that mergers and acquisitions significantly enhance plant productivity, although they also result in the downsizing of establishments and firms. Firm performance does not decline in aftermath of these transactions. We conclude that mergers and acquisitions constitute a mechanism for improving the sorting and matching of plants and workers to more efficient uses.

Keywords: Mergers and Acquisitions, Human Capital, Total Factor Productivity, Downsizing, Compensation, Matched Employer-Employee Data

JEL Classification: G34, D24, C81