Corporate M&As and Labor Market Concentration: Efficiency Gains or Power Grabs?

Abstract

Mergers of firms that share labor markets increase labor market concentration which can lead to labor efficiency gains and/or create labor market power for the merged firms. Using a novel measure based on establishment-level employment data, we find that merger-induced increases in labor market concentration explain value creation in a sample of completed U.S. public firm mergers from 1991 to 2016. Analysis of the stock market reactions of rival, supplier, and customer firms, as well as firm- and establishment-level real effects in the merging firms, supports a labor efficiency explanation of these merger gains.