Work

Do political ideology and polarization place a discount on M&A premiums?

Year: 2025

Type: article

Abstract: This study investigates whether M&A premiums are influenced during election years by a country’s political ideology, the degree of political polarization, and the presence of closely contested elections. Using a dataset spanning from 2000 to 2022, comprising 1646 announced deals in election years across 29 countries, we find that political ideology significantly affects M&A premiums. Premiums tend to be lower in countries leaning to the right and higher in those left-leaning ones. However, these effects are not driven by political polarization at ideological extremes, by narrowly decided elections, or by the polarization level of the acquirer’s country. Overall, our findings suggest that investors incorporate the political orientation of the target country into their valuation of M&A deals during election years.

Source: Finance research letters

DOI: 10.1016/j.frl.2025.108575

Authors: Victor Barros, Kuan Hon Cheang, Cristina Gaio, Tiago Cruz Gonçalves

Institutions: University of Lisbon, ISEG - Instituto Superior de Economia e Gestão

Language: English

Topic: Corporate Finance and Governance

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

SDG: Peace, justice, and strong institutions

Open Access status: hybrid

Estimated APC paid: $3,730