Misconduct synergies

Do corporate control transactions discipline the labor force? Professors Yimfor and Tookes use the investment advisory industry as a laboratory to test whether there are improvements in employee misconduct following M&A events ("misconduct synergies'').

Consistent with synergies, they find that employee misconduct of the combined firm drops by between 25 and 34 percent following mergers. However, contrary to the idea that better-performing firms tend to purchase poor-performing ones, they find that both targets and acquirers have better misconduct records than the industry's average firm. Moreover, they find evidence of assortative matching on misconduct, where low (high) misconduct acquirers tend to purchase low (high) misconduct targets. This suggests complementarities, where target and acquirer mechanisms for monitoring and disciplining employees are more effective when used together and is consistent with Rhodes-Kropf and Robinson (2008). Indeed, target and acquiring firm employees have similar pre-merger misconduct records on average, but the sensitivity of employment separation to misconduct increases post-merger, suggesting improved disciplinary mechanisms.

• Emmanuel Yimfor
• Mergers and Acquisitions
• M&A
• employee misconduct
• labor force discipline
• Blue Bag Lunch Talk