Cross-border Spillovers: How US Financial Conditions affect M&As Around the World

Katharina Bergant, Prachi Mishra and Raghuram Rajan

No 31235, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We find that financial conditions in the core have significant spillover effects on cross-border mergers and acquisitions (M&As). On average, a 1 percentage point easing of the IMF US Financial Conditions Index is associated with approximately a 10% higher volume of cross-border M&As. The spillovers are stronger for countries with more liabilities denominated in foreign currency (or in US dollars). We find that the spillovers are driven by changes in US financial conditions, rather than changes in Euro Area conditions. Deals that happen when financial conditions in the US are tighter (and therefore acquisitions fewer) add more value for the acquirers, as reflected in higher acquirer excess stock returns around the announcement.

JEL-codes: G1 (search for similar items in EconPapers)
Date: 2023-05
New Economics Papers: this item is included in nep-com, nep-fdg and nep-ifn
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