Acquirers’ political connections and bargaining outcomes in corporate takeover negotiations: Evidence from antitrust reviews

Simon Yu Kit Fung and Huang, Lawrence (Hong)

Journal of Contemporary Accounting and Economics, 2024, vol. 20, issue 1

Abstract: We examine how acquirers’ political connections affect takeover bargaining that involves significant regulatory uncertainties, when the target’s options of putting itself to another bidder are restricted. Opposite to prior takeover theories, we show that a politically connected acquirer pays a lower (rather than higher) takeover premium to and shares a smaller portion of the takeover gains with the target in the context of antitrust reviews, consistent with a bargaining benefit for the connected acquirer. Corroborating this bargaining argument, we find that the results are more pronounced in situations where: (1) the antitrust concerns are more severe; (2) the targets have fewer outside options other than the connected acquirers; and (3) the acquirers’ political connections are more valuable. Our results highlight the value of political connections to shareholders in takeovers, affecting not only the likelihood of completion but also the bargaining outcomes of the deal under the shadow of costly regulation.

Keywords: Corporate takeover; Political connections; Takeover antitrust investigation; Division of takeover gains; Bargaining power (search for similar items in EconPapers)
JEL-codes: D72 G34 G38 K21 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jocaae:v:20:y:2024:i:1:s1815566923000498

DOI: 10.1016/j.jcae.2023.100399

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Journal of Contemporary Accounting and Economics is currently edited by Agnes C.S. Cheng, P. Clarkson, F.A. Gul, Zoltan Matolcsy, Dan Simunic and Ben Srinidhi

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