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

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.