National Security, Protectionism, and Shareholder Wealth

62 Pages Posted: 23 Jul 2018 Last revised: 24 Feb 2021

See all articles by David Godsell

David Godsell

University of Illinois at Urbana-Champaign

Ugur Lel

University of Georgia - Department of Banking and Finance

Darius P. Miller

Southern Methodist University (SMU) - Finance Department

Date Written: July 22, 2018

Abstract

We study the economic consequences of a protectionist foreign investment screening law that grants U.S. regulators broad new powers to revise or reject foreign acquisitions of firms deemed critical to U.S. national security. Our results document an important tradeoff between U.S. national security and shareholder wealth: securities regulation intended to improve national security reduces foreign demand for U.S. equities and lowers firm value. We corroborate this inference by curating an expansive database of 151 national security related foreign investment screening laws adopted by non-U.S. countries around the world. We document similarly large declines in the frequency and magnitude of national security firm takeovers following the adoption of these protectionist laws in G-7 countries. Our evidence suggests that proliferating protectionist laws weaken firm values and takeover markets.

Keywords: FINSA, CFIUS, financial protectionism, mergers and acquisitions.

JEL Classification: F52, G14, G34, G38, K22

Suggested Citation

Godsell, David and Lel, Ugur and Miller, Darius P., National Security, Protectionism, and Shareholder Wealth (July 22, 2018). SMU Cox School of Business Research Paper No. 18-23, Available at SSRN: https://ssrn.com/abstract=3218001 or http://dx.doi.org/10.2139/ssrn.3218001

David Godsell

University of Illinois at Urbana-Champaign ( email )

Champaign, IL 61820
United States
1.217.300.0844 (Phone)

HOME PAGE: http://https://giesbusiness.illinois.edu/profile/david-godsell

Ugur Lel (Contact Author)

University of Georgia - Department of Banking and Finance ( email )

Terry College of Business
Athens, GA 30602-6253
United States

Darius P. Miller

Southern Methodist University (SMU) - Finance Department ( email )

United States

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