Should I stay or should I go? understanding employees’ decisions to leave after mergers in Hong Kong’s banking industry

Abstract

Recently, Chinese firms are increasingly acquiring firms overseas. This is often followed by high levels of employee exit from the acquired firm, which can be problematic. To better understand this phenomenon, we use the unfolding model of voluntary turnover to examine why and how individual employees of Hong Kong-based banks make the decision to either stay or go after their bank is taken over by a Chinese bank. We obtain data from three major acquisitions of banks in Hong Kong by Chinese state-owned banks from 2004 to 2008. Our sample consists of 406 employees from the acquired banks as well as non-acquired banks. We find that employees that have left after being acquired are more likely to report experiencing a “shock” than are employees of non-merged banks and that this influences their decision to leave. We also find that in the merger context, male employees, front-line employees and officer-level employees have different leaving decision paths from their female, back-office, and non-officer-level counterparts respectively. No such differences are found in the non-merger context. In addition, we find that a retention bonus delays departure after the merger. These findings contribute to research and practice of managing employee turnover after cross-border acquisitions by Chinese firms.