Title

National Security, Protectionism, and Shareholder Wealth

Publication Date

7-23-2018

Abstract

We study the economic consequences of the Foreign Investment and National Security Act (FINSA). FINSA is a protectionist foreign investment screening law that grants U.S. regulators broad new powers to revise or reject foreign acquisitions of U.S. firms. After FINSA, takeovers and equity values decline for firms in 61 industries – comprising one-third of the Compustat universe – that regulators deem relevant to national security. A wide variety of robustness tests corroborate. This study documents an important tradeoff between U.S. national security and shareholder wealth: Securities regulation designed to address national security threats deters demand for U.S. equities and lowers firm value.

Document Type

Article

Keywords

FINSA, CFIUS, financial protectionism, mergers and acquisitions.

DOI

10.2139/ssrn.3218001

Source

SMU Cox: Finance (Topic)

Language

English

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