Financial Protectionism, M&A Activity, and Shareholder Wealth
69 Pages Posted: 23 Jul 2018 Last revised: 9 Jan 2019
Date Written: July 22, 2018
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: Suggested Citation