National Security, Protectionism, and De-Globalization

46 Pages Posted: 23 Jul 2018 Last revised: 8 Feb 2022

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 investigate the effect of national security-related financial protectionism on globalization. We vary financial protectionism using the enactment of the Foreign Investment and National Security Act of 2007 (FINSA) in the United States and the staggered adoption of analogous laws in 33 non-U.S. countries between 2002 and 2020. We measure globalization using cross-border acquisition activity. We document that takeovers decline for firms in 61 national security-related industries when national security-related financial protectionism increases. Consistent with techno-nationalism, we document that takeover declines are concentrated in research-intensive national security firms. A wide variety of placebo and robustness tests corroborate our primary results. Our evidence suggests that national security-related financial protectionism is an economically significant factor driving de-globalization.

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 De-Globalization (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://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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