The new culture of matching

Using detailed data on individual campaign contributions to Democrats and Republicans, our estimates show that firms are considerably more likely to announce a merger, complete a merger, and a have shorter time-to-completion when their political attitudes are closer. Furthermore, acquisition announcement returns and post-merger operating performance are significantly higher when the acquirer and the target have more similar political attitudes.

That is from a new research paper by Duchin, Farroukh, Harford, and Patel.  Via the excellent Kevin Lewis.

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Certain industries tend to be more Democratic or Republic, right? Does this paper control for that? It could just be that intra-industry mergers are easier than inter-industry mergers.

Yes... it controls for that.

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It controls for industry, size, and book-to-market, but that doesn't really seem adequate. I've only skimmed it, but what about geographic location, or where they fit within the industry segmentation (i.e. luxury vs value), or even the age of the company or its board.

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Well, this sounds convincing. And a likely explanation for that failed Daimler/Chysler merger.

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Rather awkwardly, given that I have a Ph.D. in economics, I'm not entirely sure. Like Iuzh says, they have some controls, but it doesn't seem like that's enough to pick up the thing you're (quite rightly) worried about.

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Nice headline

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Yet another thing that can be traced back to Newt Gingrich and his innovation in demanding that companies stop making matching donations and pretend to be above the partisan fray.

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Associative mating strikes again

Associative mating, like societies/organizations, civilizations, and M&A's is all about high-trust vs. low-trust.

Things tend to go more smoothly when you're not expecting a knife in the back. How could you blame them.

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Assortative mating.

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I'm skeptical too. Business political attitudes are shaped by what's best for the particular business. Tabarrok mentioned the agricultural bailout. Republicans have traditionally been supporters of farm subsidies. Why? Is it because big agriculture makes big campaign contributions? Or consider Cowen's farm tractors: I suspect that Deere makes large campaign contributions to the same politicians who recive them from big agriculture. Bankers are seingers. That too, but I am referring to bankers swinging from campaign contributions to Republicans and then to Democrats and then swinging back again depending on which way the wind is blowing (bailing out banks vs deregulating banks). I don't see business as being ideological (with some very big exceptions). Business is practical. Now, a certain business in the oil and gas industry claims to be ideological, but mostly supports politicians (i.e., Republicans) who support deregulation of the industry. If the conclusion of the study is that business people are whores and will support whomever is the highest bidder, well, that's probably about right. And as it should be, I might add.

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"Business political attitudes are shaped by what's best for the particular business."

Why are the political postures of CNN, and the away that those postures are presented, best for the business of AT&T, which owns that network?

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