Does Terrorism Affect Acquisitions?

Tung Nguyen, Dimitris Petmezas, Nikolaos Karampatsas

Research output: Contribution to journalArticlepeer-review

4 Citations (Scopus)
33 Downloads (Pure)


Using terrorist attacks as an exogenous shock to uncertainty, we provide evidence that firms located near terrorism-stricken areas are less likely takeover targets for two years after the attack and receive lower acquisition premiums. The latter finding is reflected in lower target firm abnormal returns and synergy gains. Additionally, in terrorism-stricken areas, target firms are associated with a lower share of synergies, withdrawn deals rise, and acquirers are more likely to get involved in acquisitions of target firms located in different metropolitan statistical areas than their own or acquire faraway target firms. We attribute our results to the real options theory, which predicts that high uncertainty increases the value of the option to delay investments. Additionally, we show that the impact on target firm human capital and acquirer CEO uncertainty and fear are potential sources of terrorism-induced uncertainty with the former source prevailing over the latter.
Original languageEnglish
Pages (from-to)4134-4168
Number of pages35
JournalManagement Science
Issue number7
Early online date8 Aug 2022
Publication statusPublished - 1 Jul 2023
Externally publishedYes

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  • Terrorism
  • Mergers and acquisitions (M&As)
  • Real Options
  • Uncertainty
  • Human Capital


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