Employee-Manager Alliances and Shareholder Returns from Acquisitions

Employee-Manager Alliances and Shareholder Returns from Acquisitions

Ronald Masulis, Cong Wang, Fei Xie

Series number :

Serial Number: 

Date posted :

December 11 2018

Last revised :

December 06 2018
SSRN Share


  • Market for Corporate Control • 
  • Takeover Protection • 
  • Worker-Manager Alliance • 
  • Employee Stock Ownership Plan • 
  • Acquisition Profitability • 
  • agency problems • 
  • Employee Treatment

We examine the potential for management-worker alliances when employees have substantial voting rights, and how such alliances affect the balance of power between managers and shareholders. We find that substantial employee voting rights exacerbate the manager-shareholder conflicts.

Specifically, they entrench incumbent managers and allow them to pursue value-destroying acquisitions by undercutting the disciplinary influence of the corporate control market. Importantly, employee support for managers is conditional on favorable treatment of employees. Our findings are consistent with Pagano and Volpin’s (2005) theory of worker-management alliances and highlight the potential risks associated with large employee voting power.

Published in

Published in: 
Publication Title: 
Journal of Financial and Quantitative Analysis (JFQA), Forthcoming


Real name:
Cong Wang
Real name:
Research Member
University of Delaware, Lerner College of Business and Economics