Making or Breaking a Deal: the Impact of Electoral Systems on Mergers & Acquisitions

Abstract

The phenomenal increase in mergers and acquisitions (M&As) activities brought a widespread adoption of merger control laws throughout the world, including both developed and developing countries. Governments throughout the world, however, responded differently towards the regulation of M&A activities by adopting and enforcing merger control regimes with a varying degree of stringency. This article examines the impact of the electoral system on the governmental intervention on merger & acquisitions (M&A) activities. Empirical analyses of the data set that includes all M&A transactions from 1975 to 2006 suggest that countries with the majoritarian electoral system are more likely to not only adopt stringent merger control laws but also to disapprove the proposed deals than countries with the proportional electoral system. This finding confirms that merger control policies are indeed vulnerable to political influence and provides a support to recent works that link majoritarian systems with pro-competitive regulatory policies.