National Security, Protectionism, and Shareholder Wealth

56 Pages Posted: 23 Jul 2018 Last revised: 9 Dec 2021

See all articles by David Godsell

David Godsell

University of Illinois at Urbana-Champaign

Ugur Lel

University of Georgia - Department of Banking and Finance

Darius P. Miller

Southern Methodist University (SMU) - Finance Department

Date Written: July 22, 2018

Abstract

We study the economic consequences of the Foreign Investment and National Security Act (FINSA). FINSA is a protectionist foreign investment screening law that grants U.S. regulators broad new powers to revise or reject foreign acquisitions of U.S. firms. After FINSA, takeovers and equity values decline for firms in 61 industries – comprising one-third of the Compustat universe – that regulators deem relevant to national security. A wide variety of robustness tests corroborate. This study documents an important tradeoff between U.S. national security and shareholder wealth: Securities regulation designed to address national security threats deters demand for U.S. equities and lowers firm value.

Keywords: FINSA, CFIUS, financial protectionism, mergers and acquisitions.

JEL Classification: F52, G14, G34, G38, K22

Suggested Citation

Godsell, David and Lel, Ugur and Miller, Darius P., National Security, Protectionism, and Shareholder Wealth (July 22, 2018). SMU Cox School of Business Research Paper No. 18-23, Available at SSRN: https://ssrn.com/abstract=3218001 or http://dx.doi.org/10.2139/ssrn.3218001

David Godsell

University of Illinois at Urbana-Champaign ( email )

Champaign, IL 61820
United States
1.217.300.0844 (Phone)

HOME PAGE: http://https://giesbusiness.illinois.edu/profile/david-godsell

Ugur Lel (Contact Author)

University of Georgia - Department of Banking and Finance ( email )

Terry College of Business
Athens, GA 30602-6253
United States

Darius P. Miller

Southern Methodist University (SMU) - Finance Department ( email )

United States

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