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Do Politics Shape Buyout Performance?

Author

Listed:
  • Oliver Gottschalg

    (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique)

  • Aviad Pe'Er

Abstract

Before your next U.S. acquisition, check how the company's home state votes. Our research shows that the performance of buyouts in "red" Republican states is likely to be above average, while buyout performance in "blue" Democratic states is likely to fall below the mean. (See map.) This finding held even after controlling for a dozen other factors that could explain performance differences, including the target firm's size, the historical performance of buyouts in its sector, and the performance of the acquiring firm. We argue that Republican views are better aligned with buyout value-creation strategies (such as outsourcing labor, shutting down less efficient units, lower commitment to social responsibility, and deunionization) than Democratic views are.

Suggested Citation

  • Oliver Gottschalg & Aviad Pe'Er, 2008. "Do Politics Shape Buyout Performance?," Post-Print hal-00758553, HAL.
    • Handle: RePEc:hal:journl:hal-00758553
    DOI: 10.1225/F0811A
    as

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    Keywords

    Politics; Buyout Performance;

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