Financial Protectionism, M&A Activity, and Shareholder Wealth

69 Pages Posted: 23 Jul 2018 Last revised: 9 Jan 2019

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

Multiple version iconThere are 2 versions of this paper

Date Written: July 22, 2018

Abstract

The Foreign Investment and National Security Act (FINSA) dramatically increased scrutiny of M&A activity in one-third of the CRSP-Compustat universe by the Committee on Foreign Investment in the United States (CFIUS). We find that the frequency of foreign takeovers declines for U.S. firms more likely to attract scrutiny from CFIUS after FINSA, including research-intensive firms (by 56%) and those with greater ability to disrupt U.S. supply chains (by 36%). FINSA-affected firms lose 4.2% of their value over a three-day window surrounding nine events related to the passage of FINSA. Our paper quantifies the costs of M&A laws enacted to increase financial protectionism under the auspices of national security.

Keywords: mergers and acquisitions, event study analysis, corporate control, financial protectionism, economic nationalism, FINSA, CFIUS.

JEL Classification: F52; G14; G34; G38

Suggested Citation

Godsell, David and Lel, Ugur and Miller, Darius P., Financial Protectionism, M&A Activity, 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://business.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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