Terrorism, national security, and takeover performance

International Review of Financial Analysis, vol. 96, pp. 103634

Abstract

We investigate the potential impact of an acquiring country's situation regarding terrorism and security on an acquirer's long-term post-acquisition takeover performance. Through an extensive analysis of 30,401 M&A deals spanning 53 countries between 1990 and 2016, we provide substantial international evidence that the prevailing level of terrorism in the acquiring country significantly diminishes takeover gains over an extended period. On the other hand, acquirer security enhances long-term takeover performance. In addition, we find that religious fractionalization intensifies the negative impact of terrorism. Moreover, we observe that an acquiring country's terrorism and security situation have a much stronger influence on domestic mergers and on acquirers from less globalized economies, which tend to be less diverse and more severely affected by terrorism and security issues compared to acquirers involved in cross-border mergers and hailing from more globalized economies. Finally, while the market reacts quickly to an acquiring country's terrorism situation, the effects on relatively long-term business performance develop gradually.

Authors 2

1. Bushra Ghufran corresponding

   ESSCA School of Management

   Affiliation as printed

   ESSCA School of Management, Department of Finance, Espace Européen de l'entreprise - LE TWINS, 23 rue de la Haye, 67300 Schiltigeim, France

2. Wolfgang Breuer Aachen Department of Finance

   RWTH Aachen University

   Affiliation as printed

   RWTH Aachen University, Department of Finance, Templergraben 64, 52056 Aachen, Germany