Political Attitudes, Partisanship, and Merger Activity

43 Pages Posted: 16 Dec 2019

See all articles by Ran Duchin

Ran Duchin

University of Washington - Michael G. Foster School of Business

Abed El Karim Farroukh

University of Washington

Jarrad Harford

University of Washington

Tarun Patel

University of Washington

Date Written: Nov 30, 2019

Abstract

This paper provides novel evidence that similarity in employees’ political attitudes plays a role in mergers and acquisitions. Using detailed data on individual campaign contributions to Democrats and Republicans, our estimates show that firms are considerably more likely to announce a merger, complete a merger, and a have shorter time-to-completion when their political attitudes are closer. Furthermore, acquisition announcement returns and post-merger operating performance are significantly higher when the acquirer and the target have more similar political attitudes. The effects of political partisanship on mergers are stronger in more recent years, when the political polarization in the U.S. is greater. Overall, we provide estimates that political attitudes and polarization have real effects on the allocation of assets in the economy.

Keywords: campaign contributions, mergers and acquisitions, politics, polarization

JEL Classification: G34, D72

Suggested Citation

Duchin, Ran and Farroukh, Abed El Karim and Harford, Jarrad and Patel, Tarun, Political Attitudes, Partisanship, and Merger Activity (Nov 30, 2019). Available at SSRN: https://ssrn.com/abstract=3497907 or http://dx.doi.org/10.2139/ssrn.3497907

Ran Duchin (Contact Author)

University of Washington - Michael G. Foster School of Business ( email )

Box 353200
Seattle, WA 98195-3200
United States

Abed El Karim Farroukh

University of Washington ( email )

Box 353200
Seattle, WA 98195-3200
United States
2066319983 (Phone)

Jarrad Harford

University of Washington ( email )

Box 353226
Seattle, WA 98195-3226
United States
206-543-4796 (Phone)
206-543-7472 (Fax)

HOME PAGE: http://faculty.washington.edu/jarrad/

Tarun Patel

University of Washington ( email )

WA
United States
4046416431 (Phone)

HOME PAGE: http://tarundpatel.com

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