Does Terrorism Affect Acquisitions?

Management Science, Forthcoming

72 Pages Posted: 21 Sep 2018 Last revised: 3 Feb 2022

See all articles by Tung Nguyen

Tung Nguyen

Alliance Manchester Business School

Dimitris Petmezas

Durham University Business School

Nikolaos Karampatsas

affiliation not provided to SSRN

Date Written: February 2, 2022


Using terrorist attacks as an exogenous shock to uncertainty, we provide evidence that firms located near terrorism-stricken areas are less likely takeover targets for two years after the attack and receive lower acquisition premiums. The latter finding is reflected in lower target firm abnormal returns and synergy gains. Additionally, in terrorism-stricken areas, target firms are associated with lower share of synergies, withdrawn deals rise, and acquirers are more likely to get involved in acquisitions of target firms located in different metropolitan statistical areas than their own or acquire faraway target firms. We attribute our results to the real options theory which predicts that high uncertainty increases the value of the option to delay investments. Additionally, we show that the impact on target firm human capital and acquirer CEO uncertainty and fear are potential sources of terrorism-induced uncertainty with the former source prevailing over the latter.

Keywords: Terrorism; Mergers and Acquisitions (M&As); Real Options; Uncertainty; Human Capital

JEL Classification: G14, G34, J31

Suggested Citation

Nguyen, Tung and Petmezas, Dimitris and Karampatsas, Nikolaos, Does Terrorism Affect Acquisitions? (February 2, 2022). Management Science, Forthcoming, Available at SSRN: or

Tung Nguyen

Alliance Manchester Business School ( email )

AMBS Crawford House
Booth Street West
Manchester, Greater Manchester, M15 6PB
United Kingdom


Dimitris Petmezas (Contact Author)

Durham University Business School ( email )

Mill Hill Lane
Durham, DH1 3LB
United Kingdom

Nikolaos Karampatsas

affiliation not provided to SSRN

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