We found a match
Your institution may have access to this item. Find your institution then sign in to continue.
- Title
Does Terrorism Affect Acquisitions?
- Authors
Nguyen, Tung; Petmezas, Dimitris; Karampatsas, Nikolaos
- Abstract
Using terrorist attacks as an exogenous shock to uncertainty, we provide evidence that firms located near terrorism-stricken areas are less likely takeover targets for two years after the attack and receive lower acquisition premiums. The latter finding is reflected in lower target firm abnormal returns and synergy gains. Additionally, in terrorism-stricken areas, target firms are associated with a lower share of synergies, withdrawn deals rise, and acquirers are more likely to get involved in acquisitions of target firms located in different metropolitan statistical areas than their own or acquire faraway target firms. We attribute our results to the real options theory, which predicts that high uncertainty increases the value of the option to delay investments. Additionally, we show that the impact on target firm human capital and acquirer CEO uncertainty and fear are potential sources of terrorism-induced uncertainty with the former source prevailing over the latter. This paper was accepted by Gustavo Manso, finance. Supplemental Material: The online appendix and data are available at https://doi.org/10.1287/mnsc.2022.4506.
- Subjects
REAL options (Finance); STANDARD metropolitan statistical areas; ABNORMAL returns; TERRORISM; TARGET acquisition; ECONOMIC shock
- Publication
Management Science, 2023, Vol 69, Issue 7, p4134
- ISSN
0025-1909
- Publication type
Article
- DOI
10.1287/mnsc.2022.4506