Journal of Corporate Finance Vol. 62 2020
The impact of monetary policy on M&A outcomes
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 aggregare M&A activity.
- DOI
- 10.1016/j.jcorpfin.2019.101529
- Volume
- 62
- Pages
- 101529
- Language
- en
- Sources
- openalex crossref bibtex:phds-export.bib