Economic policy uncertainty and acquisition performance: Australian evidence
Article
Article Title | Economic policy uncertainty and acquisition performance: Australian evidence |
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ERA Journal ID | 18553 |
Article Category | Article |
Authors | Shams, Syed (Author), Gunaskerage, Abey (Author) and Velayutham, Eswaran (Author) |
Journal Title | International Review of Economics and Finance |
Journal Citation | 78, pp. 286-308 |
Number of Pages | 23 |
Year | 2022 |
Place of Publication | United Kingdom |
ISSN | 1059-0560 |
1873-8036 | |
Digital Object Identifier (DOI) | https://doi.org/10.1016/j.iref.2021.12.004 |
Web Address (URL) | https://www.sciencedirect.com/science/article/pii/S1059056021002525 |
Abstract | We investigate the influence of economic policy uncertainty on the market valuation of acquisitions undertaken by Australian firms, finding a negative association between economic policy uncertainty and abnormal returns earned by acquirers. In general, with greater economic policy uncertainty, acquirers pay higher premiums, execute transactions more quickly and are less likely to complete deals. With respect to acquisition choices, acquirers prefer to purchase public targets versus private targets, use stock swaps versus cash in financing deals and are less likely to make cross-border acquisitions. Deals completed at a time of heightened economic policy uncertainty are found to contribute to acquirers’ significant underperformance in the long run. Our main findings are robust after addressing issues related to sample selection bias and selection based on observable firm characteristics. Our findings support the notion that economic policy uncertainty adversely affects acquisition outcomes in Australia. |
Keywords | Acquisitions; Bid premiums; Economic policy uncertainty; Market reactions; Mergers |
Contains Sensitive Content | Does not contain sensitive content |
ANZSRC Field of Research 2020 | 350299. Banking, finance and investment not elsewhere classified |
Public Notes | Files associated with this item cannot be displayed due to copyright restrictions. |
Byline Affiliations | School of Business |
Monash University | |
Institution of Origin | University of Southern Queensland |
https://research.usq.edu.au/item/q6z38/economic-policy-uncertainty-and-acquisition-performance-australian-evidence
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