Abstract
We investigate the influence of economic policy uncertainty on the market valuation of acquisitions undertaken by Australian firms, finding a negative association between economic policy uncertainty and abnormal returns earned by acquirers. In general, with greater economic policy uncertainty, acquirers pay higher premiums, execute transactions more quickly and are less likely to complete deals. With respect to acquisition choices, acquirers prefer to purchase public targets versus private targets, use stock swaps versus cash in financing deals and are less likely to make cross-border acquisitions. Deals completed at a time of heightened economic policy uncertainty are found to contribute to acquirers’ significant underperformance in the long run. Our main findings are robust after addressing issues related to sample selection bias and selection based on observable firm characteristics. Our findings support the notion that economic policy uncertainty adversely affects acquisition outcomes in Australia.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.