Economic and Political Uncertainty: The Case of U.S. Acquiring Firms
30 Pages Posted: 3 Apr 2019
Date Written: March 10, 2019
We examine the impact of economic and political uncertainty on the choice made by U.S. firms to expand through domestic or cross-border mergers and acquisitions. Using recently developed indexes of economic and political uncertainty, we document that U.S. firms use cross-border mergers and acquisitions to diversify the risk arising from policy uncertainty. We find that the investment horizon of institutional investors plays a significant role in mitigating the uncertainty affecting the deals. Overall, our results provide support to the argument that stable institutional investors are effective monitors of corporate strategies.
Keywords: Merger and acquisition, Institutional investors, Political uncertainty, Economic uncertainty
JEL Classification: G34
Suggested Citation: Suggested Citation