Mergers and acquisitions; Policy uncertainty; Deal withdrawal; Stock price reactions
Using a comprehensive sample of U.S. M&A deals from 2000 through 2020, we examine whether the magnitude of policy uncertainty can explain the likelihood of deal cancellation. Consistent with our conjecture, we find that policy uncertainty is a significant predictor of the death of deals. Moreover, we find evidence of a negative association between policy uncertainty and the target firm stock price levels, implying that the market also incorporates the consequences of policy uncertainty into target valuation and bid likelihood outcomes. Altogether, our findings add to the understanding of the interplay between policy uncertainty and external investments through M&A.