Mergers, Acquisitions and Employment Duration

This paper uses a unique data set of linked employer-employee data in which asset transfers between firms can be identified to study the manner in which employment policy changes in the aftermath of a merger or acquisition (M&A). Using parametric duration models with unobserved heterogeneity and modeling the status of the employer with respect to M&A activity, it appear that the employment policy of the firm changes radically after an M&A with respect to the “steady state”. Not only do various observed characteristics impact the probability of continued employment in a different manner after an M&A, but the distribution of unobserved characteristics that affect employment changes reflecting differences in the stock of previous employees and the flow of new hires as does the impact of this heterogeneity on employment durations.