Economic policy uncertainty and cross-border mergers and acquisitions

Gregoriou, Andros; Nguyen, Binh Duy; Nguyen, Tung Duy; Le, Huong; Hudson, Robert

Abstract

We examine the impact of policy uncertainty on cross-border mergers and acquisitions (M&As). Using a sample of 23 countries worldwide over the period from 2003 to 2016, we provide evidence that when a country has high policy uncertainty, the volume of inbound acquisition decreases whereas the total number of outbound deals increase significantly. Policy uncertainty also encourages acquirers to use stock as a method of payment and offer lower premium to targets. We also find that the percentage of full control cross-border M&A deals is negatively correlated to the level of policy uncertainty. Further evidence suggests that policy uncertainty complicates the takeover process by increasing the probability of withdrawn and pending deals as well as requiring longer time periods to complete deals.

Citation

Gregoriou, A., Nguyen, B. D., Nguyen, T. D., Le, H., & Hudson, R. (2021). Economic policy uncertainty and cross-border mergers and acquisitions. International review of financial analysis, 78, Article 101911. https://doi.org/10.1016/j.irfa.2021.101911

• Journal Article Type: Article
• Acceptance Date: Sep 20, 2021
• Online Publication Date: Sep 24, 2021
• Publication Date: Nov 1, 2021
• Deposit Date: Sep 20, 2021
• Publicly Available Date: Mar 25, 2023
• Journal: International Review of Financial Analysis
• Print ISSN: 1057-5219
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 78
• Article Number: 101911
• DOI: https://doi.org/10.1016/j.irfa.2021.101911
• Keywords: Cross-border mergers and acquisitions; Economic policy uncertainty
• Public URL: https://hull-repository.worktribe.com/output/3841394