Race, Gender, and Employee Turnover: Evidence from Mergers and Acquisitions

In today’s corporate landscape, diversity, equity, and inclusion (DEI) aren’t just moral imperatives or branding exercises—they’re strategic expectations. Investors want hard evidence that DEI goals are being operationalized, not just talked about. Employees expect fairness that goes beyond slogans. Regulators are watching closely. But when firms face moments of disruption, like mergers and acquisitions (M&As), does DEI actually influence decision-making?

Historically, DEI considerations have been examined mostly at the boardroom level—especially board diversity and its relationship to governance or firm performance. But there’s been surprisingly little attention paid to how DEI principles shape decisions at the workforce level, particularly in times of organizational change. M&As represent a critical stress test in this regard. These transactions trigger massive shifts in resource allocation, and labor restructuring is often a key part of realizing cost synergies.

In other words, when layoffs are on the table and pressure to deliver value is high, do companies really consider DEI? Or does it fall by the wayside? 

Our study explores this exact question with novel data and fresh insights—and its findings challenge several long-standing assumptions about who wins and loses in the post-merger landscape.

The Research: A New Lens on Workforce Turnover 

Our study constructs a large-scale dataset using over one million LinkedIn profiles, merging employment data with demographic estimates derived from names and facial recognition models. By combining these features using machine learning, we significantly improve classification accuracy for race and gender. This rich dataset allows us to track turnover patterns for employees at target firms from three years prior to one year post-merger, with a particular focus on demographic disparities.

Our headline finding is stark: the average turnover rate jumps from 19.7% before a merger to 28.6% after—a 45% increase. That in itself isn’t surprising. But when disaggregated by race and gender, the data tell a more nuanced story.

White and Asian Pacific Islander (API) employees saw the largest post-merger increases in turnover. Black employees saw the smallest. Female employees across all racial groups were less likely to leave than their male counterparts. Perhaps most notably, black women had the lowest increase in turnover of any demographic group, while white men and API employees (regardless of gender) saw the highest.

These patterns run counter to decades of labor market research, which has consistently shown that women and underrepresented minorities tend to face greater job insecurity, especially during economic downturns or restructuring events.

So, what’s going on?

Scrutiny Changes Incentives

Unlike general downsizing during recessions, M&As happen under a microscope. These are high-profile events, often covered by the media, monitored by shareholders, and subject to legal review. In this environment, decisions around layoffs and retention are not only operational—they’re reputational.

We find that firms in litigation-prone industries show even larger disparities in post-merger turnover between white males and other demographic groups. This suggests that legal exposure may constrain firms from taking cost-cutting measures that could be perceived as discriminatory.

And this isn’t just theoretical. Turnover gaps between white males and minority/female employees are significantly wider in industries with a history of employee-related litigation. The implication is clear: under greater scrutiny, firms become more cautious about disproportionately impacting underrepresented groups.

Turnover and Performance: Are DEI-Conscious Decisions Value-Enhancing?

Of course, the central tension in M&As is between cutting costs and maintaining (or even enhancing) firm value. If DEI-aligned retention strategies were inconsistent with shareholder interests, we might expect to see weaker performance outcomes for those deals.

But that’s not what the data show.

In fact, labor cost savings—partly driven by strategic workforce reductions—are strongly associated with positive acquirer announcement returns. A 1% reduction in labor costs corresponds to a 1.15% to 1.60% increase in abnormal stock returns and a 2.3% to 3.1% increase in combined deal synergies.

So while layoffs do occur, and cost discipline clearly matters, the selective nature of turnover suggests that firms are not simply cutting across the board. Instead, they appear to be making targeted, economically rational decisions—while still navigating DEI concerns.

Not All Turnover Is Equal

While it's encouraging that minority and female employees are not disproportionately affected by post-merger restructuring, the long-term picture is less optimistic.

Among those who do leave, underrepresented employees face more challenging career outcomes. They are more likely to remain unemployed, less likely to be promoted in subsequent roles, and more likely to experience downward job mobility compared to white male peers.

In other words, even if DEI plays a moderating role during the initial wave of post-merger decisions, systemic inequities still shape what happens next. Retention during M&A integration is only one part of the DEI puzzle; supporting equitable outcomes after separation is another.

Final Thoughts: Values Under Pressure

This study provides the first large-scale empirical evidence on how DEI considerations affect workforce outcomes in M&A contexts—and the findings are both surprising and instructive. While firms are indeed restructuring aggressively after acquisitions, they appear to be doing so with some awareness of the reputational and legal implications of ignoring DEI principles.

But there’s still work to be done. The fact that turnover disparities are sensitive to external pressures—such as litigation risk—suggests that DEI adherence is often reactive rather than proactive. And the continued disparity in post-exit outcomes for minority employees underscores the need for broader systemic support beyond the point of retention.

Ultimately, M&As remain a revealing lens for understanding how companies prioritize—and operationalize—DEI when the stakes are highest. The emerging lesson is clear: DEI isn’t just a public-facing commitment. It’s increasingly embedded in the decisions that matter most to both employees and shareholders. 

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Rui Dai is a Senior Research Support Director, Wharton Research Data Services, University of Pennsylvania 

Tingting Liu is a Professor of Finance at the University of Tennessee

Cong (Roman) Wang is an Assistant Professor of Finance, Rawls College of Business, Texas Tech University

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