Published online by Cambridge University Press: 21 April 2017
This research examines the relationship between policy uncertainty and mergers and acquisitions (M&As). We find that policy uncertainty is negatively related to firm acquisitiveness and positively related to the time it takes to complete M&A deals. In addition, policy uncertainty motivates acquirers to use stock for payment and to pay lower bid premiums. Acquirers, on average, create larger shareholder value from M&A deals undertaken during periods of high policy uncertainty, which is attributable to their prudence as well as the wealth transfer from the financially constrained targets to acquirers.
This paper was written while Nguyen was a Ph.D. student at the University of Massachusetts Lowell. We are especially grateful to Art Durnev (the referee), whose comments on the paper substantially improved the exposition and analyses. We also appreciate the helpful comments from Julian Atanassov, Brian Baugh, Sudip Datta, Kathleen Farrell, Geoffrey Friesen, Steven Freund, Jarrad Harford (the editor), Mai Iskandar-Datta, Anand Jha, Sedzro Komlan, Tunde Kovacs, Manoj Kulchania, Saira Latif, Kooli Maher, Ranjan D’Mello, Stas Nikolova, Shakil Quayes, Guay Richard, Emre Unlu, John Wagster, Jing Wang, Liying Wang, Julie Wu, and Mouchette Xavier as well as session participants at the 2016 Financial Management Association Doctoral Consortium and seminar participants at the University of Massachusetts Lowell, University of Nebraska Lincoln, Université du Québec à Montréal, and Wayne State University. We thank Di Huang for sharing the fuzzy matching codes. All errors remain the sole responsibility of the authors.
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