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M&As and political uncertainty: Evidence from the 2016 US presidential election

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  • Chahine, Salim
  • Dbouk, Wassim
  • El-Helaly, Moataz

Abstract

This paper investigates whether the takeover market has been affected by heightened macroeconomic uncertainty, following President Trump’s Election, both in the US and globally. We have based our analysis on a four-year period around the 2016 US elections, and as such we have observed an increase in M&A deals and associated valuations, after the election; this was especially true for cross-border deals acquiring U.S. targets, consistent with a tariff-jumping hypothesis. The high target valuations are also the product of the implementation of a lower corporate tax rate, which reveals positive externalities for U.S. targets, stemming from the protectionist and lower corporate tax initiatives of the regime.

Suggested Citation

  • Chahine, Salim & Dbouk, Wassim & El-Helaly, Moataz, 2021. "M&As and political uncertainty: Evidence from the 2016 US presidential election," Journal of Financial Stability, Elsevier, vol. 54(C).
    • Handle: RePEc:eee:finsta:v:54:y:2021:i:c:s1572308921000255
    DOI: 10.1016/j.jfs.2021.100866
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    2. Yongqiang Gao & Miaohan Zhang & Haibin Yang, 2023. "Looking Good in the Eyes of Stakeholders: Corporate Giving and Corporate Acquisitions," Journal of Business Ethics, Springer, vol. 185(2), pages 375-396, June.
    3. Werner Roeger & Paul J. J. Welfens, 2022. "The macroeconomic effects of import tariffs in a model with multinational firms and foreign direct investment," International Economics and Economic Policy, Springer, vol. 19(2), pages 245-266, May.

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    More about this item

    Keywords

    Macroeconomic uncertainty; Mergers; Tariff-Jumping hypothesis; Protectionism;
    All these keywords.

    JEL classification:

    • B17 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - International Trade and Finance
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • F38 - International Economics - - International Finance - - - International Financial Policy: Financial Transactions Tax; Capital Controls
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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