Does policy uncertainty predict the death of M&A deals?

Man Dang (), Darren Henry, Hong An Thai, Xuan Vinh Vo and Mieszko Mazur

Finance Research Letters, 2022, vol. 46, issue PB

Abstract: Using a comprehensive sample of U.S. M&A deals from 2000 through 2020, we examine whether the magnitude of policy uncertainty can explain the likelihood of deal cancellation. Consistent with our conjecture, we find that policy uncertainty is a significant predictor of the death of deals. Moreover, we find evidence of a negative association between policy uncertainty and the target firm stock price levels, implying that the market also incorporates the consequences of policy uncertainty into target valuation and bid likelihood outcomes. Altogether, our findings add to the understanding of the interplay between policy uncertainty and external investments through M&A.

Keywords: Mergers and acquisitions; Policy uncertainty; Deal withdrawal; Stock price reactions (search for similar items in EconPapers)
JEL-codes: G24 G32 G38 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:46:y:2022:i:pb:s1544612321004657

DOI: 10.1016/j.frl.2021.102489

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