Political Attitudes, Partisanship, and Merger Activity
52 Pages Posted: 16 Dec 2019 Last revised: 18 Nov 2021
Date Written: November 17, 2021
Abstract
We demonstrate that similarity in employees’ political attitudes plays an important role in mergers and acquisitions. Using detailed data on employees’ campaign contributions to Democrats and Republicans, we find that firms are considerably more likely to announce and complete a merger when their political attitudes are closer. Furthermore, acquisition announcement returns and post-merger performance are higher when employees have more similar political attitudes. The effects are stronger when political polarization is greater, and when the target and acquirer plan to integrate operations. Overall, we provide new estimates that political attitudes and polarization affect the allocation of real assets.
Keywords: campaign contributions, mergers and acquisitions, politics, polarization
JEL Classification: G34, D72
Suggested Citation: Suggested Citation