National Security, Protectionism, and Shareholder Wealth
56 Pages Posted: 23 Jul 2018 Last revised: 9 Dec 2021
Date Written: July 22, 2018
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: Suggested Citation