Impact of Terrorism on Cross-Border Mergers and Acquisitions (M&As): Prevalence, Frequency and Intensity

Abstract

This paper contributes to the literature on the impact of terrorism on international business by focusing on the specific case of cross-border mergers and acquisitions (MA (b) whether terrorism affects developing countries differently; (c) whether good institutions in developing host countries can offset the negative effects of terrorism; and (d) whether terrorism incidents in a particular economy has negative spillovers to its neighbors. To preview the main conclusions, we find that an augmented gravity model fits the data well. While the occurrence of terrorism in either the host or source does not appear to have any impact on bilateral M&A, the frequency and intensity of terrorist attacks significantly deter M&A flows, especially in the latter. We also find that good institutions negate the impact of terrorist attacks in the developing host country. There is also some evidence that regional spillovers reduce M&As in the host country.