The impact of monetary policy on M&A outcomes

Research output: Contribution to journalArticlepeer-review


External organisations

  • University of Edinburgh
  • New York University


Monetary policy influences a wide range of Mergers and Acquisitions (M&A) outcomes. First, an increase in the federal funds rate predicts a negative market reaction to M&A announcements, an increase in the likelihood of deal withdrawal, and significant financing challenges for the acquirer in the post-acquisition phase. Second, M&As announced during periods of high monetary policy uncertainty are associated with significant declines in acquirer value. This negative market reaction reflects a unique discount to compensate for the high riskiness of M&As in an uncertain monetary environment. Finally, we show that monetary contraction, rather than monetary policy uncertainty, is a key contributor to the decline in aggregate M&A activity.


Original languageEnglish
Article number101529
Number of pages27
JournalJournal of Corporate Finance
Early online date31 Oct 2019
Publication statusPublished - Jun 2020


  • federal funds rate, expected financing cost, monetary policy uncertainty, real options, mergers and acquisitions (M&As), acquirer abnormal returns, M&A completions