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‘Know when to fold 'em’: Policy uncertainty and acquisition abandonment

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  • Andrew Ferguson
  • Cecilia Wei Hu
  • Peter Lam

Abstract

This study investigates how policy uncertainty affects the acquisition process during the post‐announcement period. Utilising a sample of Australian mining project acquisitions over 1998–2017, we find that rising policy uncertainty after initial acquisition announcements is associated with delays in deal completion. In addition, prolonged high policy uncertainty plays an important role in triggering acquisition abandonment. Further, the stock market reacts less negatively to deal abandonment decisions made amid protracted policy uncertainty, and such reactions are associated with managers' explanations for terminating the deals. Overall, our findings highlight the importance of policy uncertainty as a ‘deal‐breaker’ in acquisitions.

Suggested Citation

  • Andrew Ferguson & Cecilia Wei Hu & Peter Lam, 2024. "‘Know when to fold 'em’: Policy uncertainty and acquisition abandonment," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 64(2), pages 1277-1309, June.
    • Handle: RePEc:bla:acctfi:v:64:y:2024:i:2:p:1277-1309
    DOI: 10.1111/acfi.13179
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