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Political Uncertainty and Firm Investment: Project-Level Evidence from M&A Activity

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  • Chen, Zhenhua
  • Cihan, Mehmet
  • Jens, Candace E.
  • Page, T. Beau

Abstract

We study how firms alter investment projects to mitigate exposure to political uncertainty. We examine deal-level merger data and find that, in addition to delaying and forgoing merger announcements, acquirers shift merger announcements earlier in time to avoid the period between announcement and effective dates overlapping an election, shift targets geographically away from election states, decrease the size of election-year deals, and shift from equity to cash financing for election-year deals. These results are stronger for acquirers with tighter financial constraints and deals more likely to be financed with equity and show financing matters to firms’ responses to election uncertainty.

Suggested Citation

  • Chen, Zhenhua & Cihan, Mehmet & Jens, Candace E. & Page, T. Beau, 2023. "Political Uncertainty and Firm Investment: Project-Level Evidence from M&A Activity," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 58(1), pages 71-103, February.
    • Handle: RePEc:cup:jfinqa:v:58:y:2023:i:1:p:71-103_3
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