Institutions and the performance of politically connected M&As
By P. Brockman, Oliver M. Rui, Huan Zou. 2013
203 citations recorded by the source corpus.
We investigate the association between a firm’s political connections and its merger and acquisition (M&A) performance. Using a sample of M&A deals made by politically connected acquirers and their matched non-connected peers across 22 countries, we find that political connections play an economically significant role in post-merger performance. The nature of this effect depends on the institutional setting. In countries with strong legal systems or low levels of corruption, politically connected bidders underperform unconnected bidders by roughly 15% in terms of abnormal stock returns over a 3-year period. In contrast, politically connected bidders outperform unconnected bidders by more than 20% in countries with weak legal systems or high levels of corruption. We find more evidence of differential post-merger performance for domestic mergers than for cross-border mergers. Overall, our findings show that political connectedness has a significant influence on M&A activities, and the nature of this influence depends crucially on the institutional environment.
Subfields: Accounting, Strategy and Management
View Paper: https://www.semanticscholar.org/paper/8ef4a6e50132d5b1835018084d1621b5577a6a69
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Citations in the corpus
- An anatomy of state control in the globalization of state-owned enterprises (2015, methodology): “Also, we use both the top managers’ political backgrounds (Manager Political) and the proportion of directors with political ties on the board (Board Political Ties) to proxy for executives’ political connections (Brockman et al., 2013; Faccio, 2006).”
- Political uncertainty and cash holdings: Evidence from China (2016, background): “In a 22-country study of mergers and acquisitions, Brockman et al. (2013) report that politically connected bidders outperform unconnected bidders by 20% in countries with a weak legal system and high levels of corruption, suggesting that connected bidders obtain better information about merger…”
- Failure and success in mergers and acquisitions (2019, unknown): “Based on a global sample of politically connected firms in 22 countries, Brockman et al. (2013) show that important political factors are the strength of the legal system and the level of corruption: politically connected bidders earn 15% lower long-run abnormal stock returns relative to unconnected”