Project Details
Projekt
Corporate Finance and Human Capital Risk
Subject Area
Accounting and Finance
Term
from 2016 to 2022
Project identifier
Deutsche Forschungsgemeinschaft (DFG) - Project number 280387323
This application continues the work on our prior proposal entitled “Corporate Finance and Human Capital Risk.” This work is at the interface of financial economics and labor economics by asking how corporate transactions affect employees. The first part of this project was highly successful and has resulted in two major publications with high visibility in academia and beyond. All results are based on new linked datasets, which were created during the first project phase and combine financial information about firms and establishment-level and employee-level administrative data from the Institute for Employment Research (IAB). The applicants are currently working on a third project, which cannot be completed anymore as part of the first funding phase.For this extension application, we propose two closely related projects and build on our earlier work. The first project proposes that mergers and acquisitions (M&As) serve to form internal labor markets, which allow merged firms to better allocate employees to productive tasks. Our discussion of the extant literature on internal labor markets shows that this firm-level perspective on reallocation and productivity has been absent from this literature so far, even though this perspective has played an important role in the analysis of internal capital markets. In this project, which has already produced some preliminary results, we want to show how the creation of an internal labor market affects employees and firms and provide a novel perspective on the motives for M&As.An emerging literature argues that an important motivation for M&As is the acquisition of the target firm’s employment relationships. So far, this literature is based only on US data, and we are somewhat skeptical about this argument for reasons that we explain in greater detail below, one of them being that key employees often leave the target firm after an acquisition. We discuss this skill-scarcity motivation for M&As below and argue that other explanations, e.g., that acquirers wish to buy the target’s technology are more plausible and capable of explaining much of the evidence in the literature. In our second project, we aim to investigate and test these alternative explanations.
DFG Programme
Research Grants
International Connection
Netherlands
Cooperation Partners
Professor Stefan Obernberger; Professor Dr. Christoph Schneider
