1 SHAREHOLDERS, MANAGERS AND EMPLOYEES: RENT TRANSFER OR RENT SHARING IN CORPORATE TAKEOVERS

This paper investigates whether M&A transactions allow managers to create shareholder value at the expense of employees by analysing the relative importance of labour variables in explaining merger-related shareholder gains. The results show that in the short-run shareholder gains are inversely related with employee gains. This implies that at least some corporate restructuring might have been triggered by shareholder value creation requirements. However, the results also show that both employment and wage changes are positively associated with acquirers ’ long-run share price abnormal returns. This positive association suggests that shareholders and employees share rent during post-merger period. Overall, our results suggest that the wealth transfer theory may not be the full story in explaining power relations among shareholders, managers and employees around takeover transactions. Therefore, we conclude that both rent transfer (immediately after takeovers) and rent sharing (in the longer run) may co-exist within an M&A framework