Economic policy uncertainty, political connections, and M&As: Evidence from China

Ning Gong, Qizhi Tao and Wan Zhang

Pacific-Basin Finance Journal, 2024, vol. 85, issue C

Abstract: We find that political connections can help firms mitigate the negative impact of Economic Policy Uncertainty (EPU) on the frequency and dollar value of acquisitions in a sample of Chinese firms from 2007 to 2019. The effect is stronger for firms with higher EPU sensitivity, with higher leverage, and in heavily regulated energy and agricultural sectors. The impact of political connections appears to be based on the information advantage and not on the financing channel. A government anti-corruption rule introduced in 2013 prohibiting current and former officials from working for enterprises is used as an exogenous shock to political connections to mitigate endogeneity concerns. The prohibition appears to reduce acquisition activities when EPU is high.

Keywords: Political connections; Economic policy uncertainty; M&As; Anti-corruption campaign (search for similar items in EconPapers)
JEL-codes: G28 G32 G34 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:85:y:2024:i:c:s0927538x24000817

DOI: 10.1016/j.pacfin.2024.102330

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