Posted by Social Science Research Network
By Mihir N. Mehta (University of Michigan), Suraj Srinivasan (Harvard) & Wanli Zhao (Southern Illinois University)
Abstract: We document that firms linked to powerful US politicians that oversee merger antitrust regulators receive favorable mergers and acquisition antitrust review outcomes. When acquirers are constituents of these politicians, mergers are likely to encounter a more favorable review process. In contrast, when targets are constituents, the merger antitrust review outcomes are dependent on the target’s partiality towards the merger. To establish identification, we exploit a subset of politician turnover events that are plausibly exogenous as well as a falsification test using politicians with no jurisdiction over antitrust regulators. Politician incentives to influence merger antitrust review outcomes appear to be driven by lobbying, contributions, and prior business connections. Our findings suggest that merger antitrust reviews are not independent of self-serving political intervention.