Employee Satisfaction, Career Concerns, and Acquirer Performance

Abstract

We examine whether acquiring firms’ employee satisfaction generates shareholder value around mergers. Using over one million crowd-sourced reviews on social media, we find that acquirers with high employee satisfaction experience stronger announcement returns and improvements in operating performance. The results are robust to controlling for acquirer and deal characteristics in addition to possible unobserved heterogeneity. In particular, employee perceptions of career opportunities have the most reliable effect on performance, consistent with the literature on firm-specific human capital. Our results suggest the positive implications of employee satisfaction on post-merger performance are most pronounced when employees’ career concerns are taken into account.

Keywords: Internal stakeholders; human capital; employee relations; intangible assets;

JEL Classification: G12; G14; G34