The Influence of Pre-Merger or Acquisition External
Communication on the Overall Employee Job Satisfaction
Christiane Arenette Julie Engelbert van Bevervoorde Haddingestraat 2a, 9711KD Groningen
c.a.j.engelbertvanbevervoorde@student.rug.nl s2202581
20th of June, 2016
Msc Business Administration: Change Management Supervisor: Prof. J. Surroca
Co-assessor: Prof. L. Paul
Abstract
The impact of communication on employees is supposed to be large during M&A activity. In this study the influence of pre-merger or acquisition external communication on the overall employee jobs satisfaction is investigated. External communication is studied through press releases of top management to the stakeholders. In particular, realism and optimism within these press releases are analysed. The current research is based on two competing hypotheses, the Impression Management Theory and the Theory of Communicative Action. The data is collected in four databases and merged into one dataset. Results show that the use of realistic external communication within press releases it is likely to enhance the overall employee job satisfaction. This provides support for the Theory of Communicative Action and contributes to the literature on external communication in the context of M&As.
Table of Content
1. Introduction………...4
2. Theoretical background………...7
2.1 Employee job satisfaction………...7
2.2 Communication……….7
2.3 Impression Management Theory………..8
2.3.1 Optimism………9
2.3.2 Realism……….10
2.4 Theory of Communicative Action………..10
2.4.1 Optimism………..11 2.4.2 Realism……….11 2.5 Conceptual model………...12 3. Methodology………13 3.1 Data collection………13 3.2 Merging datasets……….14 3.3. Sample………14 3.4 Variables……….14 3.4.1 Dependent variable………..14 3.4.2 Independent variable………15 3.4.3 Control variables………..15 3.5 Data analysis………...16 4. Results………..17 4.1 Descriptive analysis………17 4.2 Correlation analysis………18 4.3 Regression analysis……….18 5. Discussion………23 5.1 Conclusion………..23
5.2 Contribution to existing literature………...24
5.3 Theoretical and managerial contributions………...25
5.4 Research limitations and recommendations………26
1. Introduction
Since the 1990s there has been a substantial growth in mergers and acquisitions (M&As) (Ranft & Lord, 2000). Although the popularity of M&As increased, the failure rates of these transactions remained rather high (Schoenberg, 2006). Research on factors leading to the failure of M&As have been mostly concentrating on strategic and financial issues. Yet, the last two decades research on the human and psychological side of M&As has emerged. The effects of M&As on the employees have received considerable attention. Researchers sought to explain the underperformance of M&As by these effects. This is important because the dysfunctional impact of uncertainty and stress on employees during such an event is substantial for the performance of the organization (Cartwright & Schoenberg, 2006; Schweiger & Denisi, 1991).
When facing an organizational change communication is recognized as a critical approach to lead an organization as well as its employees through the change process.
However, top management often fails to communicate adequately about the upcoming change and the uncertain future of the employees. Lack of communication will further increase the uncertainty and stress of the employees during the M&A activity. This can cause
dysfunctional outcomes such as stress, job dissatisfaction, low trust in or low commitment to the organization and increased intentions to leave the organization (Schweiger & Denisi, 1991). When the employee job satisfaction is low, it is likely to reduce effective performance. This can result in an increase in costs as well as a decrease in profit (Cohen & Muller-Camen, 2012).
Previous research on communication have mostly focused on the role of internal communication in organizations. Internal communication is perceived as affecting the ability to engage employees (Kress, 2005). Internal communication occurs every day within
organizations and includes chats with colleagues as well as more formal communication of top management to its employees (Welch & Jackson, 2007). Research on the quality or the tone of corporate communication imposes that effective communication positively affects the overall performance of the organization. But what could be viewed as effective
communication? Some researchers have stated that realistic communication seems to be critical, especially during an organizational change process such as M&A transactions (Cartwright & Cooper, 1993; Morrison, 2002). Nevertheless other researchers have theoretically argued that in some cases top management should avoid realistic
uncertainty (Buono, Weiss & Bowditch, 1989; Marks & Mirvis, 1986; Pritchett, 1985; Schweiger, Ivancevich & Power, 1987). Realism within corporate communication focuses on language presenting tangible, immediate, recognizable matters that affect everyday life. Another frequently researched quality or tone within corporate communication is optimism. Optimism within corporate communication focuses on language endorsing a person, group or event and highlighting their positive entailments (Hart, 2000). Optimism and realism will be the focus in the current research.
Although previous research has been done mostly on the role of internal communication, the current research will be on external communication. External
communication will be studied through press releases of top management to the stakeholders. Press releases can be considered as an important communication means that influences the employees and in turn the performance of the organization (Palmieri, 2008). In the current research, the influence of pre-merger or acquisition press releases will be studied on the employee job satisfaction.
Research has shown that organizations can use the press in order to promote their own benefits. This strategic use of press releases is likely to have a positive effect on corporate actions during mergers (Ahern & Sosyura, 2014). Press releases contain both informative and persuasive elements. They have the purpose to inform the stakeholder and at the same time organizations will try to promote a positive interpretation of their corporate actions
(Vandenberghe, 2011). The latter is argued by the Impression Management Theory. The theory states that organizations tend to selectively communicate their performance in the best possible light (Patelli & Pedrini, 2014). Although the literature on corporate communication has been dominated by the Impression Management Theory, the contrasting Theory of Communicative Action describes that communicative actions require to be comprehensible, legitimate, sincere and truthful (Habermas, 1984; 1987). These theories have been tested as opposed theories in the past, however not in the context of M&As.
This paper contributes to the literature in three respects. First, I would like to contribute to the Impression Management Theory. In contrast, I would like to provide new insight to the Theory of Communicative Action. Another purpose is to identify the
relationship of the views held by these two theories on the employee job satisfaction. Furthermore, the purpose is to yield a proper understanding on the role of external
top management on how press releases should be established in order to enhance the employee job satisfaction and in turn maintain the performance of the organization.
Based on previous literature and the above mentioned theories, I would like to the propose the following research question:
2. Theoretical background
In the current section there will be elaborated more on the different concepts included in the research question. This will be done by presenting the current literature in a distinct way and therefore providing a theoretical background.
2.1 Employee Job satisfaction
Employee job satisfaction can be defined as “the level to which a person or employee has a positive affective attitude or orientation towards their job, these feelings being directed toward the job in general or toward facets of it” (Smith, Kendall & Hulin 1969). According to Creasy, Stull and Peck (2009)employee job satisfaction is an important concept because it affects the ability of the employee to perform effectively. During M&As, high employee job satisfaction may be helpful to continue to perform effectively during a vulnerable period of an organization. Low employee job satisfaction is linked to an increase in absenteeism, job turnover, decreased task performance and a lowered morale. These negative outcomes can threaten the overall performance of organizations after mergers and acquisitions (Petty, McCee and Cavender, 1984). Moreover, there is a growing body of investigations that
indicates that mergers and acquisitions can be perceived as traumatic events by the employees and thereby affecting employee job satisfaction negatively (Mantler, Armstrong-Stassen, Cameron & Horsburgh, 1985; Buono, Bowditch & Lewis, 1985; Zhu et al. 2004). Thus, employee job satisfaction is considered to be an important organizational outcome frequently used by researchers, likewise in relations to mergers and acquisitions (Hart, 1999).
2.2 Communication
The establishment of a good communication strategy could be an approach to successful organizational change processes. Communication is identified as an instrument to increase the survival and growth of organizations (Bordia, Hobman, Jones, Gallois & Callen, 2004;
communication as “an instrument of management by means of which all consciously used forms of internal and external communication are harmonised as effectively and efficiently as possible, so as to create a favourable basis for relationships with groups upon which the company is dependent”. Previous research on communication within organizations encountering M&As have been mostly on internal communication.
Therefore, the current research will focus on external communication of top management before a merger or an acquisition. External communication will be studied through press releases. Corporate press releases are known to be important for stock prices and they can yield a strong market reaction (Neuhierl, Scherbina & Schlusche, 2013). Furthermore, press releases are used by corporate managers to convince shareholders of a proposed deal or to influence their perceptions. Press releases are considered as an important communication means that influences the employees and in turn the performance of the organization (Palmieri, 2008).
To gain insight into the quality or tone of external communication the focus will be on realism and optimism. In order to operationalize these concepts, I will rely on the language analysis of DICTION. This is a Computer-Aided Text Analysis (CATA) program. Optimism includes endorsing a person, group or event and highlighting their positive results. Negative language with the focus on catastrophe reduces optimism, while positive language increases optimism. The second concept, realism, focuses on language that presents tangible,
immediate, recognizable matters that affect everyday life. When language entails a frequent use of concrete and familiar terms and it expresses present concerns, realism enforces. It decreases when complex, uncommon words are used and long sentences (Hart, 2000).
To propose hypotheses on both realism and optimism within external communication, I will ground them in two opposing theories: the Impression Management Theory and the Theory of Communicative Action.
2.3 Impression Management Theory
regulators, trading partners, community members and employees.
Schlenker and Wiegold (1992) state that Impression Management is influenced by people’s agenda’s, their goals and plans to achieve these goals. According to Elsbach (1994) directors account for self-serving ways of communicating changes in organizational
performance in annual reports. Next to this, the Impression Management Theory violates the principle of realistic or truthful communication (Yuthas, Rogers & Dillard, 2002). Aerts (2005) claims that Impression Management is a form of strategic actions in order to mislead interpretations and expectations and to exercise influence.
2.3.1 Optimism
Optimism in corporate narratives has been considered as a form of Impression Management (Hooghiemstra, 2000). The Impression Management theory has been researched by
Clatworthy and Jones (2003) in the context of communicating good and bad news on financial accounting. The results indeed confirm that the managers of organizations tend to represent the performance of the organization in favour of the organization. No difference is found between organizations with improving and declining performance, reporting either good or bad news. Both prefer to emphasize the positive aspects of their organization. Following the definition provided by Hart (2000) that optimism indeed includes highlighting positive aspects.
When encountering a merger or acquisition, employees are faced with uncertainty and stress. Regardless of the fact that the organization perceives the merger or acquisition as good or bad news, it will emphasize its positive aspects according to the Impression Management Theory. This might impose that top management tend to emphasize the positive aspects of the upcoming merger or acquisition within the communication and thus rely on optimism. In the current research I aim to clarify this role on the employee job satisfaction during M&A activity. Thus, based on previous literature and grounded in the current theory, I hypothesize: H1: Optimistic pre-merger or acquisition communication of top management increases the
overall employee’s job satisfaction.
2.3.2 Realism
terms and it expresses present concerns. The manipulation of language redirects the attention away from bad performance results. Due to the unfaithful representation of performance an incorrect impression of the organization’s performance remains (Merkl-Davies & Brennan, 2007). According to the Impression Management Theory this might imply that organizations refrain from engaging in realistic communication and manipulate the information to its best interest. This also might impose that during the uncertainty of M&As realistic communication of top management could have a negative impact on the organization. Thus, according to the Impression Management Theory it can be proposed that realistic communication has a negative effect on the employee job satisfaction.
In a case study on internal communication Zhu, May and Rosenfeld (2004) argued that realistic communication is not always positively related to the employee job satisfaction. These researchers state that the negative relationship between information adequacy and employee job satisfaction was more negative for the employees of the acquired organizations than for the employees of the acquiring organizations. Consistent with prior literature and the current theory, I formulate the second hypothesis as follows:
H2: Realistic pre-merger or acquisition communication of top reduces the overall employee
job satisfaction.
2.4 Theory of Communicative Action
Past research has mainly been focusing on the Impression Management Theory. Yuthas et al. (2002) refute the Impression Management Theory. These researchers state that organizations are obligated to communicate information honestly and in favour of the stakeholders.
Habermas (1984, 1987) sets four norms or principles for the Theory of Communicative Action. These norms require communicators to be comprehensible, legitimate, sincere and truthful. The norms claim that the communicator must be understood, what the communicator says is justified, the communicator is sincere regarding motives and the communicator tells the truth (Yuthas et al., 2002). There is also claimed that management narratives, such as CEO’s letters to stakeholders, are a form of Communicative Action. The goal is to improve mutual understanding of performance results and advocate a common vision. Moreover, there is stated that the communication is consistent with, and shaped by, the actual performance of the organizations. Communicative Action is considered as an ethical approach to
2.4.1 Optimism
In prior research on the Theory of Communicative Action was found that the optimistic tone of CEO’s letters is congruent with both past and future performance. These researchers conclude that the tendency to distort public communication is rather low. More specifically, CEO’s engage in Communicative Action through sincere communication to their stakeholders (Patelli & Pedrini, 2014). Optimism is viewed as a manipulation to distract from actual bad performance and expectations of the future. This manipulation within optimism violates the four principles of Habermas (1984, 1987) as claimed by the Theory of Communicative Action (Yuthas et al. 2002). The definition on optimism provided by Hart (2000) includes endorsing a person, group or event and highlighting the positive results of the organization. This
definition of optimism contradicts the view of the Theory of Communicative Action. Taken together, this might indicate that optimism is viewed as affecting the organization and its employees negatively. Thus, according to the Theory of Communicative Action this might impose that when organizations engage in optimistic communication the employee job
satisfaction will be reduced. Based on the current theory and previous research, I hypothesize: H3: Optimistic pre-merger or acquisition communication of top management reduces the
overall employee job satisfaction.
2.4.2 Realism
Drawing on the conclusion of Patelli and Pedrini (2014) that the tendency in CEO’s letters to the stakeholders to distort public communication is rather low, there can be derived that top management engages in sincere and realistic communication to the stakeholders. Next to this, Yuthas et al. (2002) investigated corporate annual reports, an important element of corporate public communication. They have found that organizations expecting negative surprises show more evidence of Communicative Action relating to the four principles of Habermas (1984, 1987) comprehensibility, legitimacy, sincerity and truthfulness. This might indicate that M&As can be viewed as negative surprises for organizations and its employees. When encountering these negative surprises top management tend to engage in realistic communication, following the Theory of Communicative Action. Realism is defined as focusing on language that presents tangible, immediate, recognizable matters that affect everyday life (Hart, 2000). It can be concluded that this definition is in accordance with the view held by the Theory of Communicative Action.
management communicating information inadequately and in turn poor employee job satisfaction. Adequate communication facilitates the adjustment process of employees to the merged organization to clarify roles, to learn about the other organization’s culture and to socially integrate (Morrison, 2002). Moreover, Schweiger and DeNisi (1991) conducted a research and provided employees with realistic internal communication (via telephone, meetings and internal newsletters) about the upcoming merger or acquisition. The results demonstrated that realistic communication reduced the negative outcomes, such as the job dissatisfaction of the employees. Hence, based on the Theory of Communicative Action as well as previous research, I propose the fourth hypotheses:
H4: Realistic pre-merger or acquisition communication of top management increases the
overall employee job satisfaction.
2.5 Conceptual models
Impression Management Theory
3. Methodology
3.1 Data collection
The information on M&A transaction will be obtained in four existing databases. First, I will obtain information on the employee job satisfaction, using the ASSET4 ESG database. After that, I will use Zephyr and Orbis to gather information on the M&A deals and financial data. Finally, I will use the LexisNexis database to access press releases before M&As.
I will start with gathering data from ASSET4 ESG. This database provides the most restricted list of organizations, approximately 4000 global public organizations and includes environmental, social and governance information based on more than 250 key performance indicators and more than 750 individual data points (Semenova & Hassel, 2015). In this database information on the employee job satisfaction and HR practices will be gathered. This data will be selected in the global list of organizations of ASSET4 from 2010 to 2014.
Zephyr contains information on M&A transactions. The database contains close to 140.000 transactions with approximately 60.000 additional transactions added per year. It is provided by Bureau van Dijk Electronic Publishing. The transaction data includes European, North American and recently also Asian transactions. (Tudor, 2003). This database will provide me with data on M&A deals such as the year of the deal and several identity codes.
Orbis provides data on the financial and production activities of organizations across the world. This database is also provided by Bureau van Dijk Electronic Publishing (Kalemli-Ozcan, Sorensen, Villegas-Sanchez, Volosovych & Yesiltas, 2015). This database will provide me with information on the total assets, profits and industry type.
Finally, I will maintain a certain sample and I will manually search for press releases before the merger of acquisition in the LexisNexis database. This database contains hundreds of full-text documents from approximately 5900 news, business, legal, medical and reference publications, including magazines, newspapers and transcripts (Rada, 2007). I will search for press releases of top management before the merger and acquisition deals. The power search in LexisNexis for press releases will include the ticker code of the acquiring organization and merger or acquisition in the subject. These press releases represent the external
3.2 Merging datasets
After collecting the data from the four databases, the datasets of Zephyr, Orbis and ASSET4 can be merged using STATA 13. Regarding LexisNexis an additional step needs to be taken. The manually obtained press releases will be analysed with DICTION. This program is theoretical based in linguistic research (Hart, 2000; Short & Palmer, 2007). DICTION uses a lexical analysis to study the vocabulary and word choice. The analysis is done by the
following five “master variables”: (1) certainty; (2) optimism; (3) activity; (4) realism; (5) commonality. In the current research, I will only use the scores on the optimism and realism variable.
The variable realism taps into pragmatism and analyses language describing tangible, recognizable and immediate matters, while the optimistic variable examines language
supporting a person, group, concept or event and supposes overconfidence. DICTION
compares word usage in the analysed text to the words contained in the DICTION predefined dictionary. Results from the word search are applied in a formula and eventually there will be scores assigned to the optimism and realism variables (Short & Palmer, 2008). After that, I will merge the results on realism and optimism with the previous merged dataset.
3.3 Sample
The resulting sample includes 102 merger or acquisition deals. Since the organizations will be gathered primarily from the global ASSET4 organization list, they originate from all over the world. Due to the fact that the organizations need to be present in all four databases a sample of 102 remains. Information on the organizations will be gathered between 2010 and 2014. The variables will be measured on a yearly basis thus in total there will be 510 observations included in the sample. The collected information will only be on the acquirer organization. In the next part, there will be elaborated on the variables that will be used in the current research.
3.4 Variables
3.4.1 Dependent variable
integrate the employees' knowledge into its employee satisfaction initiatives?”, “Does the company have a policy to improve employee satisfaction?” and “Does the company describe, claim to have or mention, processes in place to improve employee satisfaction?” These three questions will be measured through a dummy, assigning 1 point when the answer is positive and 0 points when the answer is negative. The three separate dummies will be combined into one variable. The dependent variable lies on a scale from 0 to 3 and is considered as count data. When the outcome is 0 the least overall employee job satisfaction is found and when the outcome is 3 the highest overall employee job satisfaction is found.
3.4.2 Independent variable
The quality or tone of communication will be measured by a Computer-Aided Text Analysis (CATA) program called DICTION. This program will analyse press releases of top
management of the acquirer organization before a merger or an acquisition. Firstly, the extent to which external communication is realistic will be measured, using the realism variable created by DICTION. Realism was developed to tap into pragmatism and analyses language describing tangible, recognizable and immediate matters. After that, DICTION will analyse the extent to which these press releases contain optimism. The optimistic variable examines language supporting a person, group, concept or event and supposes overconfidence (Short & Palmer, 2007).
3.4.3 Control variables
In order to assess the relationship between the quality or tone of external communication and the employee job satisfaction I will add control variables to the research. First of all, I will add HR practices of the acquirer organization as a control variable. HR practices are viewed as a form of organizational support, reducing uncertainty during a merger or acquisition and affecting the employee job satisfaction (Sun et al. 2007; Buiter & Harris, 2013). HR practices are measured in the ASSET4 ESG database, including these questions. “Does the company monitor or measure its performance on employment quality?”, “Has the company an employee health & safety team?” and “Does the company train its executives or key employees on health & safety?” These three questions will be measured through a dummy and similarly a new HR variable will be computed on a scale from 0 to 3.
Besides that, the size of the organization in total assets and the profit of the acquirer organization are added as control variables. These variables seem to influence the
(Amihud & Lev, 1981; Lubatkin , 1983; Kusewitt, 1985). Following the paper of Edmans (2011) the type of industry will be added as a control variable. Zephyr yielded SIC codes for the type of industry. To control for industry a new variable will be computed on the mean of the employee job satisfaction sorted by industry and year. There also will be controlled for the year in which the merger or acquisition took place. This will be done by computing a dummy and assigning 1 to the year in which the merge happened and 0 to the additional 4 years.
3.5 Data analysis
In order to test the hypotheses, I will execute a regression analysis. Since the dependent variable employee job satisfaction consists of count data a Poisson regression would be suitable. The current research includes two dependent variables optimism and the realism. Besides that, I will add five control variables to the regression analysis. The total assets, HR practices, the industry, the profit and the dummy created for the year of the merger or acquisition. Before executing the Poisson regression analysis, descriptive statistics will be gathered and a correlation matrix will ran in order to gain more insight in the variables. There also will be tested whether the data meets the assumptions for a Poisson regression analysis.
4. Results
The resulting sample included 102 global M&A deals between the years 2010 and 2014. All variables were measured on a yearly basis, thus in total 510 observations were included in the sample, only on the acquirer organization. The results of the analyses will be presented below.
4.1 Descriptive analysis
To get a clear overview of the current research the variables are summarized (table 1). The mean statistic of the optimism variable is M=50,286. This mean statistic was higher than the mean statistic of the realism variable (M=40,929). This might imply that overall there was more optimism detected in the press releases than realism. Besides that, the minimum maximum range lies considerably higher for the optimism variable than for the realism variable. Thus, throughout the press releases there was on average more optimism detected than realism.
The mean of the dependent variable job satisfaction is M=1,486. Since the scale of this variable ranges from 0 to 3, it can be concluded that on average the organizations possess employees with an average job satisfaction level. The mean of the control variable HR
practices lays slightly below the average (M=1,331) and also includes a scale from 0 to 3. The mean of the total assets is M=2.36e+14 and the mean of the profit is M=2.60e+14.
Additionally, the type of industry and the year in which the organization acquired another organization or merged have been added to the current research as control variables. These variables were excluded from the descriptive analysis because the industry variable includes codes and the year is computed using a dummy.
Table 1
Summary statistics
Variable N Mean Std. Dev. Min Max
Job satisfaction Total assets 510 510 1.486 2.36e+14 1.245 2.59e+14 0 0 3 9.91e+14
Profit 510 2.60e+14 2.75e+14 0 9.96e+14
HR practices 510 1.331 1.115 0 3
Realism 501 40.929 3.209 28.27 48.71
To test the hypotheses, a Poisson regression analysis was executed and the results will be presented later in this research. Before the execution of a Poisson regression certain
assumptions should be met. The first assumption includes that the dependent variable should consist of count data, this assumption was met in the current research. The second assumption imposes that the research should include one or more independent variables. This research includes two independent variables and this assumption was also met. Moreover, a third assumption that should be met. The mean and the variance within the Poisson distribution should be similar, this is called equidispersion. This assumption was met (M=1,486 ≈
S2=1,245). In case of overdispersion a negative binominal regression would have been more appropriate, however in this research I can proceed with the execution of a Poisson
regression.
The dependent variable does not seem to have problems with the skewness and kurtosis (table 2). A normal distribution has a skewness of 0 and a kurtosis of 3. So, there can be concluded that the dependent variable is normally distributed and has a lightly tailed distribution.
Table 2
Skewness and Kurtosis of the dependent variable job satisfaction Job satisfaction
Skewness -0.00228 Kurtosis 1.379
4.2 Correlation analysis
To get insight in the correlations between the variables that are included in the current research, a correlation matrix was conducted (table 3). Although the hypotheses has been tested in a Poisson regression analysis and will be presented later, there seems to be a positive moderate correlation between the employee job satisfaction and the realism variable
(r=0,2402 p<0.0.5), while the correlation between the employee job satisfaction and the optimism variable is not significant (r=0,0369, p>0,05). This might imply a preliminary support of the fourth hypothesis (H4) presented in this research and would impose support for the Theory of Communicative Action. However nothing is known about the direction of the correlations. This has been tested in a regression model and will be presented later.
satisfaction (r=0.5628, p<0,05). Profit is negatively correlated with employee job satisfaction (r= -0.1202, p<0,05). The same holds for the size of the organization measured in total assets, however this statistic is not significant (r= -0.0515, p>0,05). The control variable industry yields a low and not significant correlation statistic (r= 0.0074, p>0,05).
Table 3
(pairwise) Correlation matrix between all variables Job satisf. Indu
stry Total ass. Profit HR pract. Realis m Optimism Job satisf. - Industry 0.0074 - Total ass. -0.0515 -0.227* - Profit -0.1202* -0.0279 0.3241* - HR pract. 0.5628* -0.2385* -0.0866* -0.1744* - Realism 0.2402* -0.0461 -0.0603 -0.1015* 0.1413 * - Optimism 0.0369 -0.0352 0.0248 0.0711 -0.0306 0.1428 - Notes. * significant at p<0.05, N=510 4.3 Regression analysis
The assumptions for executing a Poisson regression have been met. In the Poisson regression model (table 4) the realism variable is significant (B= 0,0392, p>z 0,001). To allow the coefficient of the realism variable to be interpretable, the coefficient needs to be
exponentiated (Exp(B)=1,0400). This means that detected realism in press releases increases the job satisfaction with a score of 1,0400 or with 4%. This suggests support for the fourth hypothesis “realistic pre-merger or acquisition communication of top management increases the overall employee job satisfaction”. This might provide evidence for the Theory of
Furthermore, the control variable industry yielded a significant result (B=0,000783, p>z 0,000). Although this coefficient is rather small, the type of industry positively influences the employee job satisfaction. HR practices also received a significant result (B=0,403, p>z 0,000). The exponentiated value (Exp(B)=1,497) entails that there was 49,7% increase in job satisfaction for every unit increase in HR practices. HR practices seems to have the biggest positive influence on the employee job satisfaction. Neither did the total assets and the profit receive significant results, nor did the dummy controlled for year.
Table 4
Poisson regression on the dependent variable job satisfaction LR chi2(5) = 194.99
Prob > chi2 = 0.0000
Log likelihood = -713.34145 Pseudo R2 = 0.1202 Job
satisfaction
Coef. Std. Error Z P>z [95%
Additionally, the goodness-of-fit has been analysed. A significant statistic of goodness-of-fit indicates to avoid to use a Poisson distribution. In this case these statistics are not significant (p=0,103, p=0,829). This provides another validated reason to have ran a Poisson regression.
Table 5
Goodness-of-fit of the Poisson regression model
Deviance goodness-of-fit 545.631
Prob > chi2(505) 0.103
Pearson goodness-of-fit 474.819
Prob > chi2(505) 0.829
In order to assess the robustness of the dependent variable a Probit regression has been conducted (table 6). This has been done on the dummy computed on employee job
Table 6
Probit regression on dummy for robustness check LR chi2(5) = 120.31
Prob > chi2 = 0.0000
5. Discussion
In this section the current research will be evaluated. The results and interpretations will be compared and linked to existing literature. The research question will be answered and concluded on. Moreover, theoretical and managerial implications will be presented based on the current findings. Finally, limitations will be introduced and future research will be suggested.
5.1 Conclusion
In the present investigation two competing theories are presented, the Impression Management Theory and the Theory of Communicative Action. For both theories two hypotheses were computed. Based on The Impression Management Theory, the hypotheses state that (H1) optimistic pre-merger or acquisition external communication increases the employee job satisfaction; and (H2) realistic pre-merger or acquisition external
communication reduces the employee job satisfaction. In contrast, based on the Theory of Communicative Action, the hypotheses describe that (H3) optimistic pre-merger or
acquisition external communication reduces the employee job satisfaction; and (H4) realistic pre-merger or acquisition external communication increases the employee job satisfaction. The aim of the current research was to find support for one of the theories and to extend the literature on communication in the context of M&As and in that way to answer the research question: “What is the influence of the quality or tone of pre-merger or acquisition external communication of top management to the stakeholders on the overall employee job
satisfaction?”
The most important outcome of the current research is that there is found significant support for the Theory of Communicative Action in the context of mergers and acquisitions. Specifically there is found support for the fourth hypothesis (H4). This implies that when top management engages in realistic communication before M&A activity to its stakeholder by means of press releases, the overall employee job satisfaction will be enhanced. Hence, the opposite hypothesis on realism (H2) following the Impression Management Theory is not supported. Contrarily, the optimism variable did not yield any significant results. This suggests that the other hypothesis (H3) based on the Theory of Communicative Action is not supported. The first hypothesis (H1) on optimism providing evidence for the Impression Management Theory was also not supported by the results.
between external communication of top management and the overall employee job satisfaction the present outcomes are reviewed. There can be concluded that realistic pre-merger or acquisition external communication of top management positively influences the employee job satisfaction during M&A activity. This result yields evidence for the Theory of Communicative Action within press releases in the context of M&A activity. Regarding the contribution to the literature on communication, this could be a proper recommendation on how press releases should be established. This could be viewed as an important
recommendation since it supports maintaining the performance of organizations when employees encounter difficulties and uncertainty during M&As.
5.2 Contribution to existing literature
In this section, I will compare the results of the current research to the existing literature. Primarily, literature on the Impression Management will be compared and contrasted. Clatworthy and Jones (2003) conducted a research on financial accounting. They concluded that organizations tend to represent the performance of the organization in favour of the organization and that organizations rely on optimism. Since optimism did not yield any significant results these findings are not supported by the current results. This could be explained by the fact that optimism might need a moderator in order to receive significant results. Under certain conditions this variable might provide significant outcomes.
As stated by Merkl-Davies and Brennan (2007) on the Impression Management theory the truth is distorted and this distortion can be achieved through poor readability and
manipulation of language. This distortion is in contrast with the definition on realism provided by Hart (2000). This might imply that organizations engage in unrealistic communication. In turn it could redirect attention away from bad performance results and impose the impression of an enhanced performance of the organization. According to the Impression Management Theory this might imply that when organizations engage in realistic communication the employee job satisfaction is reduced. The current research provided evidence for the opposite results on realism. The results state that top management should engage in realistic communication in order to enhance the employee job satisfaction.
four principles of Habermas (1984, 1987) as claimed by the Theory of Communicative Action (Yuthas et al. 2002). This might have implied that optimism within communication is viewed as affecting the organization and its employees negatively. However this finding on optimism is not supported by the current results since the optimism variable was not significant. It could again be possible that the optimism variable needs a certain moderator in order to yield a significant result under certain conditions. Future research should investigate this more in-depth.
Yuthas et al. (2002) stated that organizations encountering negative surprises or events display evidence of Communicative Actions, relating to the four principles of Habermas (1984, 1987) comprehensibility, legitimacy, sincerity and truthfulness. This might have imposed that organizations encountering negative events, in this case M&As, engage in realistic communication. This outcome is supported in the current research and yields evidence for the Theory of Communicative Action in the context of M&A on realistic external communication. Besides that, Cartwright and Cooper (1993) and Schweiger and Denisi (1991) conducted research on realistic internal communication in the context of the mergers and acquisitions. Both investigations demonstrated that realistic communication reduces negative outcomes, such as employee job satisfaction. Likewise, in the current research similar findings are found on realistic external communication.
5.3 Theoretical and managerial implications
The most important goal of this research was to contribute to the Impression Management Theory and to the opposite Theory of Communicative Action. Both theories have not been researched in the context of M&As and thus the theoretical contribution could be viewed as a substantial added value. Besides that, this research contributed to the literature on
communication, particularly on external communication.
Here, I contributed to the Theory of Communicative Action and provided insight into the application of the theory in the context of M&A activity. In the current research, external realistic communication of top management to the stakeholders turned out to be positively related to the employee job satisfaction. This indicates support for the Theory of
Communicative Action in the context of M&As. It is established that when top management uses realistic language in external communication to the stakeholders, this will affect the employee job satisfaction positively. This finding also contributes to the literature on external communication and press releases.
engage in realistic communication within their press releases to the stakeholders in order to enhance the employee job satisfaction. Low employee job satisfaction can threaten the overall performance of the organization (Petty, McCee and Cavender, 1984). This should be avoided. Thus, in order to maintain and enhance the employee job satisfaction and in turn the
performance of the organization, top management should keep in mind to engage in realistic communication. Derived from this could be that top management should present information based on the four principles comprehensibility, legitimacy, sincerity and truthfulness
(Habermas, 1984 & 1987).
5.4 Research limitations and recommendations
Every conducted research includes limitations and therefore provides recommendations for the future. The current research is conducted within five years and includes a sample size of 102 M&A deals. Further research should be done in an extended time period and should include a bigger sample. Moreover, M&A deals consisting of more than one acquirer were excluded from this research since including these deals led to several difficulties. My suggestion is to include these deals in future research. When LexisNexis did not yield press releases, these press releases were also excluded. However this could also have been
interpreted as valuable information. I recommend for further research to conduct one analysis including information on the missing press releases and another excluding this information.
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