Mergers and Acquisitions and Brexit: A Natural Experiment

46 Pages Posted: 21 Jul 2022 Last revised: 6 Dec 2022

See all articles by Di Luo

Di Luo

University of Dundee School of Business

Tapas Mishra

Southampton Business School, University of Southampton

Zhuang Zhang

University of Southampton - Southampton Business School

Date Written: July 15, 2022

Abstract

We study the impact of Brexit uncertainty on one of the most important forms of corporate investment: mergers and acquisitions (M&As). Brexit provides us with an ideal natural experiment to explore the real effects of economic uncertainty and understand the underlying transmission mechanism. We document a significant decline in the number of M&A deals for UK firms after Brexit compared to EU firms. This inhibiting effect is amplified by the channels of real options, foreign trade, and financial constraints. Overall, our results provide for deeper understanding of this unprecedented uncertainty in Brexit policy on local M&A activity. Policy makers are urged to respond.

Keywords: Brexit; Uncertainty; Mergers and Acquisitions; Real Options

JEL Classification: G30; G38

Suggested Citation

Luo, Di and Mishra, Tapas and Zhang, Zhuang, Mergers and Acquisitions and Brexit: A Natural Experiment (July 15, 2022). Available at SSRN: https://ssrn.com/abstract=4163626 or http://dx.doi.org/10.2139/ssrn.4163626

Di Luo (Contact Author)

University of Dundee School of Business ( email )

1-3 Perth Road
Dundee
United Kingdom

Tapas Mishra

Southampton Business School, University of Southampton ( email )

University Rd.
Southampton SO17 1BJ, Hampshire SO17 1LP
United Kingdom

Zhuang Zhang

University of Southampton - Southampton Business School ( email )

Southampton, SO17 1BJ
United Kingdom

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