Collective Bargaining and Takeover Activity Around the World

Abstract

Our results highlight the importance of collective bargaining on the pattern of takeover activity in 46 countries from the early 1990s. We find that the size and dynamics of takeover markets within industries increase in countries with powerful labor unions and high coverage of bargaining coordination. Further analyses show that collective bargaining enhances takeover activity because potential acquirers have greater gain opportunities sourced from the reappropriation of employee rents. In addition, we show that the negative effect of tighter employment legislations on takeovers found in prior works is largely offset by the effect of collective bargaining. Our results provide new insights into the real effects of employment protection in the context of takeovers.