M&As and Political Uncertainty: Evidence from the 2016 US Presidential Election
51 Pages Posted: 20 Dec 2023
Date Written: Feb 18, 2021
Abstract
This paper investigates whether the takeover market has been affected by heightened macroeconomic uncertainty, following President Trump’s Election, both in the US and globally. We have based our analysis on a four-year period around the 2016 US elections, and as such we have observed an increase in M&A deals and associated valuations, after the election; this was especially true for cross-border deals acquiring U.S. targets, consistent with a tariff-jumping hypothesis. The high target valuations are also the product of the implementation of a lower corporate tax rate, which reveals positive externalities for U.S. targets, stemming from the protectionist and lower corporate tax initiatives of the regime.
Keywords: Economic Uncertainty; Mergers and Acquisitions; Taxes
JEL Classification: B17, D81, F38, G34
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