Mergers are associated with large and persistent earnings declines for incumbent employees in target firms. Linking employer‐employee administrative data with information on merger activity in Brazil, I find the negative effects concentrate on employees who exit target firms and reflect displacement in the short run and wage declines in the long run. Low‐skilled, managerial, and older employees fare worse. Overall, I conclude that mergers are followed by substantial reallocation costs reflecting losses of firm‐specific wage premiums, matching inefficiencies, and industry‐specific human capital depreciation, with employees transitioning to lower paying firms considered to be of lower productivity and employment value.

We study how the disclosure of corrupt practices affects the growth of firms involved in illegal interactions with the government using randomized audits of public procurement in Brazil. On average, firms exposed by the anti-corruption program grow larger after the audits, despite experiencing a decrease in procurement contracts. We manually collect new data on the details of thousands of corruption cases, through which we uncover a large heterogeneity in our firm-level effects depending on the degree of involvement in corruption. Using investment-, loan-, and worker- level data, we show that the average exposed firms adapt to the loss of government contracts by changing their investment strategy. They increase capital investment and borrow more to finance such investment, while there is no change in their internal organization. We provide qualitative support to our results by conducting new face-to-face surveys with business owners of government-dependent firms.