Political Uncertainty and Firm Investment: Project-Level Evidence from M&A Activity

We use gubernatorial elections in the state of headquarters of the acquirer or target and M&A deal data to examine the real effects of political uncertainty at the project level. We find that election-year mergers are smaller and less likely to be paid for in stock or announced in the second half of the year than similar non-election year mergers. Generally, our results are strongest for elections in the target state, deals for private targets, and in a subsample of deals classified as serial acquisitions. Our results demonstrate the importance of investment type to the decision to delay pre-election investment.