Cross-Border Acquisitions and Labor Regulations

60 Pages Posted: 8 Jun 2015 Last revised: 21 Jul 2023

See all articles by Ross Levine

Ross Levine

Stanford University; National Bureau of Economic Research (NBER)

Chen Lin

The University of Hong Kong - Faculty of Business and Economics

Beibei Shen

Shanghai University of Finance and Economics

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Date Written: June 2015

Abstract

Do labor regulations influence the reaction of stock markets and firm profitability to cross-border acquisitions? We discover that acquiring firms enjoy smaller abnormal stock returns and profits when targets are in countries with stronger labor protection regulations, i.e., in countries where laws, regulations, and policies increase the costs to firms of adjusting their workforces. These effects are especially pronounced when the target is in a labor-intensive or high labor-volatility industry. Consistent with labor regulations shaping the success of cross-border deals, we find that firms make fewer and smaller cross-border acquisitions into countries with strong labor regulations.

Suggested Citation

Levine, Ross and Lin, Chen and Shen, Beibei, Cross-Border Acquisitions and Labor Regulations (June 2015). NBER Working Paper No. w21245, Available at SSRN: https://ssrn.com/abstract=2615651

Ross Levine (Contact Author)

Stanford University ( email )

Stanford, CA 94305
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Chen Lin

The University of Hong Kong - Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong
China

Beibei Shen

Shanghai University of Finance and Economics ( email )

777 Guoding Road
Shanghai, AK Shanghai 200433
China

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