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National Security and Corporate Investment

Author

Listed:
  • Capkun, Vedran

    (HEC Paris)

  • Grazioli, Francesco

    (ESCP Business School)

Abstract

We examine whether and how the implementation of national security policies by the Committee on Foreign Investment in the United States (CFIUS) affects corporate investment. CFIUS can block a foreign takeover of a US company when its closing threatens to impair the national security of the United States. On a sample of 41,918 firm-year observations (6,192 US incorporated listed firms) over the 2008–2019 period, we find that CFIUS interventions reduce corporate investment by firms in industries of national security interest. We also document a decrease in corporate investment following the 2016 US presidential election, which increased the likelihood of CFIUS interventions. The effects are more pronounced among firms that are financially constrained and more exposed to foreign investments. Our results may be of interest to regulators who have recently adopted CFIUS-like mechanisms to protect their critical assets from foreign takeovers.

Suggested Citation

  • Capkun, Vedran & Grazioli, Francesco, 2023. "National Security and Corporate Investment," HEC Research Papers Series 1486, HEC Paris.
    • Handle: RePEc:ebg:heccah:1486
    DOI: 10.2139/ssrn.4505931
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    More about this item

    Keywords

    National Security; CFIUS; Corporate Investment;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • F38 - International Economics - - International Finance - - - International Financial Policy: Financial Transactions Tax; Capital Controls
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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