The Impact of Economic Nationalism in Europe on the Returns to Rivals of Crossborder M&A Bids

52 Pages Posted: 22 Mar 2017 Last revised: 11 Nov 2017

See all articles by Ronan Powell

Ronan Powell

University College Dublin (UCD) - Michael Smurfit Graduate School of Business

Sarah Prendergast

Capnua Corporate Finance

Ruchira Sharma

Dublin City University Business School

Date Written: October 10, 2017

Abstract

We examine the wealth effects of economic nationalism on domestic and foreign rivals using a novel sample of government blocked EU cross-border takeover bids. Regressions show a significantly larger net contagion effect of 0.73% (€31m) on bid announcement for domestic rivals relative to foreign. Government intervention results in larger negative returns, which become even more negative at bid resolution, especially for domestic rivals. Domestic rivals lose significantly more (€23m) over the whole bid period, likely consistent with lower future takeover likelihood. We show that economic nationalism has a significant cost, which is not only confined to the EU blocking country.

Keywords: Economic nationalism, takeovers, rivals, abnormal returns, contagion

JEL Classification: G34, G38, K21

Suggested Citation

Powell, Ronan G. and Prendergast, Sarah and Sharma, Ruchira, The Impact of Economic Nationalism in Europe on the Returns to Rivals of Crossborder M&A Bids (October 10, 2017). 30th Australasian Finance and Banking Conference 2017. Available at SSRN: https://ssrn.com/abstract=2938569 or http://dx.doi.org/10.2139/ssrn.2938569

Ronan G. Powell

University College Dublin (UCD) - Michael Smurfit Graduate School of Business ( email )

Blackrock, Co. Dublin
Ireland

Sarah Prendergast

Capnua Corporate Finance ( email )

Dublin
Ireland

Ruchira Sharma (Contact Author)

Dublin City University Business School ( email )

Dublin 9
Ireland

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