Policy Uncertainty and Mergers and Acquisitions

Nam H. Nguyen and Hieu V. Phan

Journal of Financial and Quantitative Analysis, 2017, vol. 52, issue 2, 613-644

Abstract: This research examines the relationship between policy uncertainty and mergers and acquisitions (M&As). We find that policy uncertainty is negatively related to firm acquisitiveness and positively related to the time it takes to complete M&A deals. In addition, policy uncertainty motivates acquirers to use stock for payment and to pay lower bid premiums. Acquirers, on average, create larger shareholder value from M&A deals undertaken during periods of high policy uncertainty, which is attributable to their prudence as well as the wealth transfer from the financially constrained targets to acquirers.

Date: 2017
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