IN TERNATIONAL CONFERENCE ON - CIFBA 2020 POLITICAL CORRUPTION AND MERGERS AND ACQUISITIONS Nam H.. Phan 2 , Thuy Simpson 3 1University of Texas Rio Grande Valley, 2University of Massach
Trang 1IN TERNATIONAL CONFERENCE ON - CIFBA 2020
POLITICAL CORRUPTION AND MERGERS AND ACQUISITIONS
Nam H Nguyen 1 , Hieu V Phan 2 , Thuy Simpson 3
1University of Texas Rio Grande Valley,
2University of Massachusetts Lowell, Manning School of Business,
3Grand Valley State University
ABSTRACT
This research examines the relation between political corruption and mergers and acquisitions (M&A) We find that local corruption increases firm acquisitiveness but decreases firm targetiveness The levels of corruption in acquirer areas relate positively to the bid premiums and negatively to the likelihood of deal completion Corruption motivates acquiring firms to use excess cash for payment, which mitigates the negative effect of corruption on acquirer shareholder value The evidence indicates that acquisitions help acquiring firms convert cash into hard-to-extract assets and relocate assets from the high to low corruption areas, thereby shielding their liquid assets from expropriation by local officials
Keywords: Political Corruption; Mergers and Acquisitions; Liquid Assets Shielding
JEL classifications: G30, G32
* Corresponding author
Email address: namhoang.nguyen@utrgv.edu