Strategic Downsizing after M&A: what role for Digital Technology?

Jasper van Boven, Hendrik L. Aalbers, Wilfred Dolfsma

Research output: Contribution to journalAbstractAcademic

Abstract

This study examines whether digital technologies stemming from a digital merger target influence the associations between downsizing after M&A and market reactions. Grounded in signaling theory and drawing on a sample of 201 M&A deals that took place between 2001 and 2017, we find that downsizing after a merger with a digital target can have a positive effect on the market reaction. Specifically, we find a three-way interaction between the merger target being digital, time between merger and downsizing, and magnitude of downsizing which suggests that the positive relationship between downsizing after a merger with a digital target is the most positive when downsizing takes place after more than two years while being major in magnitude. Our core contribution is to the literature on M&A related downsizing, by providing new insights into the signals stemming from downsizing in the wake of a merger and how they interact and influence market reaction. In addition, we contribute to the literature on digital M&A, by connecting digital technologies to workforce downsizing after M&A.
Original languageEnglish
JournalAcademy of Management Proceedings
Volume2023
Issue number1
DOIs
Publication statusPublished - 1 Aug 2023

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