Does Safety Uncertainty Affect Acquisitions?

61 Pages Posted: 21 Sep 2018 Last revised: 7 Jan 2020

See all articles by Tung Duy Nguyen

Tung Duy Nguyen

University of Surrey

Dimitris Petmezas

University of Surrey - Surrey Business School

Nikolaos Karampatsas

University of Surrey - Surrey Business School

Date Written: January 6, 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 Duy and Petmezas, Dimitris and Karampatsas, Nikolaos, Does Safety Uncertainty Affect Acquisitions? (January 6, 2020). Available at SSRN: https://ssrn.com/abstract=3250400 or http://dx.doi.org/10.2139/ssrn.3250400

Tung Duy Nguyen

University of Surrey ( email )

Guildford
Guildford, Surrey GU2 5XH
United Kingdom

Dimitris Petmezas (Contact Author)

University of Surrey - Surrey Business School ( email )

Guildford, Surrey GU2 7XH
United Kingdom

Nikolaos Karampatsas

University of Surrey - Surrey Business School ( email )

Guildford, Surrey GU2 7XH
United Kingdom

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