Labor Unemployment Benefits and Corporate Takeovers Jing Kong A thesis in fulfilment of the requirements for the degree of Master of Philosophy School of Banking and Finance

350 words maximum: (PLEASE TYPE) Labor contract is often used as a risk-sharing mechanism between firms and employees. From acquirer's perspective, cost saving is both a driver of making deals and a major source of deal synergies. From target's perspectives, implicit labor contracts require firms to maintain their risk-taking levels otherwise they need to compensate employees more. Takeovers are often followed by layoffs of workers. Therefore, it is possible that whether to accept takeover offer will be included in the implicit agreement. However, little is known about how potential unemployment benefits to laid-off workers affect a firm's likelihood of being acquired and the synergy of the deal. We exploit changes in state unemployment insurance laws as a source of variation in labor unemployment benefits. From acquirers' perspective, we find that acquirers prefer target firms with higher unemployment benefits, even after match firm characteristics. Moreover, we find that labor unemployment benefits affect the synergy of the M&A deals, both the bidder's announcement returns and the combined bidder and target firm's announcement returns are higher when the target firm's state unemployment benefits are higher. From target firms' perspective, we find that higher unemployment benefits increase the likelihood of firms being acquired, particular for labor intensive firms, firms in industries with high layoff rates, unionized firms, and firms with higher spending on corporate social responsibility. Our findings suggest that labor unemployment benefits have a significant impact on takeover outcomes and state unemployment insurance laws have an unintended consequence on takeovers. Declaration relating to disposition of project thesis/dissertation I hereby grant to the University of New South Wales or its agents the right to archive and to make available my thesis or dissertation in whole or in part in the University libraries in all forms of media, now or here after known, subject to the provisions of the Copyright Act 1968.1 retain all property rights, such as patent rights. I also retain the right to use in future works (such as articles or books) all or part of this thesis or dissertation. I also authorise University Microfilms to use the 350 word abstract of my thesis in Dissertation Abstracts International (this is applicable to doctoral theses only). 2,/ JI} 61 f-7 . / . � . /. Witness Signature Date The University recognises that there may be exceptional circumstances requiring restrictions on copying or conditions on use. Requests for restriction for a period of up to 2 years must be made in writing. Requests for a longer period of restriction may be considered in exceptional circumstances and re uire the a roval of the Dean of Graduate Research. FOR OFFICE USE ONLY Date of completion of requirements for Award: ORIGINALITY STATEMENT ‘I hereby declare that this submission is my own work and to the best of my knowledge it contains no materials previously published or written by another person, or substantial proportions of material which have been accepted for the award of any other degree or diploma at UNSW or any other educational institution, except where due acknowledgement is made in the thesis. Any contribution made to the research by others, with whom I have worked at UNSW or elsewhere, is explicitly acknowledged in the thesis. I also declare that the intellectual content of this thesis is the product of my own work, except to the extent that assistance from others in the project's design and conception or in style, presentation and linguistic expression is acknowledged. ’ Signed . Date . COPYRIGHT STATEMENT ‘I hereby grant the University of New South Wales or its agents the right to archive and to make available my thesis or dissertation in whole or part in the University libraries in all forms of media, now or here after known, subject to the provisions of the Copyright Act 1968. I retain all proprietary rights, such as patent rights. I also retain the right to use in future works (such as articles or books) all or part of this thesis or dissertation. I also authorise University Microfilms to use the 350 word abstract of my thesis in Dissertation Abstract International (this is applicable to doctoral theses only). I have either used no substantial portions of copyright material in my thesis or I have obtained permission to use copyright material; where permission has not been granted I have applied/will apply for a partial restriction of the digital copy of my thesis or dissertation. ' Signed . Date . AUTHENTICITY STATEMENT ‘I certify that the Library deposit digital copy is a direct equivalent of the final officially approved version of my thesis. No emendation of content has occurred and if there are any minor variations in formatting, they are the result of the conversion to digital format. ’ Signed . Date . Table of