How do US investors perceive the risk of local political corruption? Evidence from acquisition announcement

Kathy Jiang, Louise Lu

    Research output: Contribution to journalArticle

    Abstract

    This study examines the impact of local political corruption on investors evaluation of firms mergers and acquisitions (M&As) in the US. Using thenumber 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
    Original languageEnglish
    Pages (from-to)885-912
    JournalAccounting and Finance
    Volume61
    Issue number1
    DOIs
    Publication statusPublished - 2021

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