Employee reactions to M&A: role of LMX and leader communication

Abstract

Purpose

The purpose of this paper is to assess cognitive, affective, and behavioral reactions of employees to merger and acquisition (M&A) situations.

Design/methodology/approach

The paper reports responses of 225 managers of four banks that have gone through mergers (two merger cases), recently in India. Data are collected on a structured questionnaire containing standard scales of leader‐member exchange (LMX), leader communication and employees' reactions to M&As. The psychometric properties of the measures are established before testing the hypotheses.

Findings

Results show that affect mediates the relationship between cognitive and behavioral reactions to M&A. Leader communication fully mediates the relationship of the contribution dimension of LMX with cognitive reactions.

Research limitations/implications

The results have implications for using LMX and communication with the leader in M&A situations. Though, single source data may be a limitation but primary data from real‐life M&A situation is strength of the paper.

Originality/value

The study offers insight into the affective, cognitive and behavioral reactions of employees to merger and acquisition situations.

Citation

Bhal, K.T., Uday Bhaskar, A. and Venkata Ratnam, C.S. (2009), "Employee reactions to M&A: role of LMX and leader communication", Leadership & Organization Development Journal, Vol. 30 No. 7, pp. 604-624. https://doi.org/10.1108/01437730910991637