Friends in the Right Places: The Effect of Political Connections on Corporate Merger Activity

Stephen P. Ferris, Reza Houston and David Javakhadze

No 2016-WP-01, NFI Working Papers from Indiana State University, Scott College of Business, Networks Financial Institute

Abstract: This study examines how the appointment of former politicians and regulators to boards of directors or management teams influences corporate acquisition activity and performance. We find that bidders with political connections are more likely to acquire targets and avoid regulatory delay or denial. The merger premium paid increases with political connectedness. The announcement period returns show that investors recognize that bids by politically connected acquirers are more likely to create firm value. Connected bidders make more bids and bid on larger targets. Connected acquirers also enjoy superior post-merger financial and operating performance.

Keywords: Political connections; Mergers; Acquisitions; Antitrust law (search for similar items in EconPapers)
JEL-codes: G34 G38 K21 (search for similar items in EconPapers)
Pages: 68 pages
Date: 2016-08
New Economics Papers: this item is included in nep-cfn and nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (47)

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