Does Safety Uncertainty Affect Acquisitions?

61 Pages Posted: 21 Sep 2018 Last revised: 18 Mar 2020

See all articles by Tung Nguyen

Tung Nguyen

Alliance Manchester Business School

Dimitris Petmezas

Durham University Business School

Nikolaos Karampatsas

University of Surrey - Surrey Business School

Date Written: March 17, 2020

Abstract

Using terrorist attacks as an exogenous shock to safety uncertainty, we provide causal evidence that firms located near terrorism-stricken areas receive lower takeover premium. The latter finding is reflected in lower target firm abnormal returns and synergy gains. Additionally, given that firms in terrorism-afflicted areas become less attractive, they are less likely takeover targets for two years after the terrorist attack, and acquirers from such areas are more likely to buy target firms from more distant locations. We attribute our results to human capital which is affected by terrorism induced safety uncertainty, consistent with Abadie and Gardeazabal’s (2008) theoretical model.

Keywords: Terrorism, Mergers and Acquisitions (M&As), Takeover Premium, Abnormal Returns, Human Capital, Labor Productivity

JEL Classification: G14, G34, J31

Suggested Citation

Nguyen, Tung and Petmezas, Dimitris and Karampatsas, Nikolaos, Does Safety Uncertainty Affect Acquisitions? (March 17, 2020). Available at SSRN: https://ssrn.com/abstract=3250400 or http://dx.doi.org/10.2139/ssrn.3250400

Tung Nguyen

Alliance Manchester Business School ( email )

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

HOME PAGE: http://tung-dn.github.io/index.html

Dimitris Petmezas (Contact Author)

Durham University Business School ( email )

Mill Hill Lane
Durham, DH1 3LB
United Kingdom

Nikolaos Karampatsas

University of Surrey - Surrey Business School ( email )

Guildford, Surrey GU2 7XH
United Kingdom

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