How do US investors perceive the risk of local political corruption? Evidence from acquisition announcement

This study examines the impact of local political corruption on investors’ evaluation of firms’ mergers and acquisitions (M&As) in the US. Using the number of corruption convictions of government officials reported by the US Department of Justice, we find that acquirers in more corrupt court districts experience lower acquirer announcement returns, lower combined acquirer and target announcement returns, and are less likely to complete acquisitions. We further find that the relation between local political corruption and acquirer announcement returns is worsened when acquirers operate primarily in the headquarters state. Overall, the results suggest that local political corruption has an adverse impact on investors’ evaluation of a firm’s M&A profitability.</p

Map of the study area and location of the six villages in Danzhai, Guizhou, China.

<p>Map of the study area and location of the six villages in Danzhai, Guizhou, China.</p

Frequency of household interview responses.

<p>*We were informed during Interview #6 of 23 that deworming of pigs was a universal practice in the village. Thus, we began explicitly asking this question in every subsequent household interview, totaling 18 responses.</p><p>Frequency of household interview responses.</p