Economics and Finance Faculty Publications and Presentations
Document Type
Article
Publication Date
11-2020
Abstract
This research examines the relation between political corruption and mergers and acquisitions (M&As). We find that local corruption increases firm acquisitiveness but decreases firm targetiveness. The levels of corruption in acquirer areas relate positively to the bid premiums and negatively to the likelihood of deal completion. Corruption motivates acquiring firms to use excess cash for payment, which mitigates the negative effect of corruption on acquirer shareholder value. The evidence indicates that acquisitions help acquiring firms convert cash into hard-to-extract assets and relocate assets from the high to low corruption areas, thereby shielding their liquid assets from expropriation by local officials.
Recommended Citation
Nguyen, Nam H., Hieu V. Phan, and Thuy Simpson. "Political corruption and mergers and acquisitions." Journal of Corporate Finance 65 (2020): 101765. https://doi.org/10.1016/j.jcorpfin.2020.101765
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Publication Title
Journal of Corporate Finance
DOI
10.1016/j.jcorpfin.2020.101765
Comments
Original published version available at https://doi.org/10.1016/j.jcorpfin.2020.101765