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How do US Investors Perceive the Risk of Local Political Corruption? Evidence from Acquisition Announcement.

Lookup NU author(s): Dr Xuejun JiangORCiD

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Abstract

This study examines the impact of local political corruption on investors’ evaluation of firms’ mergers and acquisitions (M&As) in the US. Using the number of corruption convictions of government officials reported by the US Department of Justice, we find that acquirers in more corrupt court districts experience lower acquirer announcement returns, lower combined acquirer and target announcement returns, and are less likely to complete acquisitions. We further find that the relation between local political corruption and acquirer announcement returns is worsened when acquirers operate primarily in the headquarters state. Overall, the results suggest that local political corruption has an adverse impact on investors’ evaluation of a firm’s M&A profitability. https://doi.org/10.1111/acfi.12596

Publication metadata

Author(s): Jiang X, Lu L

Publication type: Article

Publication status: Published

Journal: Accounting & Finance

Year: 2021

Volume: 61

Issue: 1

Pages: 885-912

Print publication date: 01/03/2021

Online publication date: 08/01/2020

Acceptance date: 01/01/2020

ISSN (print): 0810-5391

ISSN (electronic): 1467-629X

Publisher: John Wiley & Sons, Inc.

URL: https://doi.org/10.1111/acfi.12596

DOI: 10.1111/acfi.12596

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