Financial Protectionism, M&A Activity, and Shareholder Wealth
This paper examines changes in M&A activity and stock market valuations around a significant law change that increased the protection of some U.S. industries against foreign acquirers. The Foreign Investment and National Security Act of 2007 (FINSA) dramatically increased scrutiny of M&A activity by the Committee on Foreign Investment in the United States (CFIUS) in a large array of U.S. industries. We find that foreign takeovers of FINSA-affected firms declined by 74% relative to our control group of unaffected firms. We further find that FINSA-affected firms lost 0.43% of their value on average ($119.21 billion in total market value) over a three-day window surrounding five events related to the passage and implementation of FINSA. Our findings suggest that financial protectionism, manifested in increased CFIUS scrutiny of M&A activity, harms shareholder wealth through a less liquid market for corporate control.?
FINSA, protectionist laws, economic nationalism, mergers and acquisitions laws, event study analysis, corporate control
SMU Cox: Finance (Topic)