The effect of specific labour market regulations on cross-border mergers and acquisitions activity

Abstract

Employment protection legislation (EPL), i.e.,hiring and dismissal regulationsaffects thedynamics ofcross-border M&A activity in recipientcountries. By disaggregating the EPL yearly country index prepared by the OECD and linking itto the proportion offoreign capital entering a target country via M&A mechanism, itis shownthat the regulatory framework for unfair dismissals dimensionandnot the other variablescomposing the indexis the factor driving a positive and significant relation on inter-country M&A activity. The results imply that this element should be consideredasan importanttool in the decision-makingprocess for policymakersand corporate practitioners.