Economic policy uncertainty and cross-border mergers and acquisitions

Andros Gregoriou, Binh Duy Nguyen, Tung Duy Nguyen, Huong Le and Robert Hudson

International Review of Financial Analysis, 2021, vol. 78, issue C

Abstract: We examine the impact of policy uncertainty on cross-border mergers and acquisitions (M&As). Using a sample of 23 countries worldwide over the period from 2003 to 2016, we provide evidence that when a country has high policy uncertainty, the volume of inbound acquisition decreases whereas the total number of outbound deals increase significantly. Policy uncertainty also encourages acquirers to use stock as a method of payment and offer lower premium to targets. We also find that the percentage of full control cross-border M&A deals is negatively correlated to the level of policy uncertainty. Further evidence suggests that policy uncertainty complicates the takeover process by increasing the probability of withdrawn and pending deals as well as requiring longer time periods to complete deals.

Keywords: Cross-border mergers and acquisitions; Economic policy uncertainty (search for similar items in EconPapers)
JEL-codes: G32 G34 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:78:y:2021:i:c:s1057521921002374

DOI: 10.1016/j.irfa.2021.101911

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