Adra, S. orcid.org/0000-0002-0187-2607, Barbopoulos, L.G. and Saunders, A. (2020) The impact of monetary policy on M&A outcomes. Journal of Corporate Finance, 62. 101529. ISSN 0929-1199
Abstract
Monetary policy influences a wide range of Mergers and Acquisitions (M&A) outcomes. First, an increase in the federal funds rate predicts a negative market reaction to M&A announcements, an increase in the likelihood of deal withdrawal, and significant financing challenges for the acquirer in the post-acquisition phase. Second, M&As announced during periods of high monetary policy uncertainty are associated with significant declines in acquirer value. This negative market reaction reflects a unique discount to compensate for the high riskiness of M&As in an uncertain monetary environment. Finally, we show that monetary contraction, rather than monetary policy uncertainty, is a key contributor to the decline in the aggregate M&A activity.
Metadata
Item Type: | Article |
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Authors/Creators: |
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Copyright, Publisher and Additional Information: | © 2019 Elsevier B.V. This is an author produced version of a paper subsequently published in Journal of Corporate Finance. Uploaded in accordance with the publisher's self-archiving policy. Article available under the terms of the CC-BY-NC-ND licence (https://creativecommons.org/licenses/by-nc-nd/4.0/). |
Keywords: | Federal funds rate; Expected financing cost; Monetary policy uncertainty; Real options; Mergers and Acquisitions (M&As); Acquirer abnormal returns; M&A completions |
Dates: |
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Institution: | The University of Sheffield |
Academic Units: | The University of Sheffield > Faculty of Social Sciences (Sheffield) > Management School (Sheffield) |
Depositing User: | Symplectic Sheffield |
Date Deposited: | 13 Sep 2021 13:04 |
Last Modified: | 13 Sep 2021 13:04 |
Status: | Published |
Publisher: | Elsevier BV |
Refereed: | Yes |
Identification Number: | 10.1016/j.jcorpfin.2019.101529 |
Open Archives Initiative ID (OAI ID): | oai:eprints.whiterose.ac.uk:178119 |
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