FAU PROF: AT&T’s Political Connections Make Time Warner Deal Likely

BOCA RATON, FL (BocaNewsNow.com) (Source: FAU) — While AT&T’s recently announced plans to acquire media giant Time Warner is drawing the attention of federal antitrust authorities, the company’s political connections greatly enhance its chances of completing the deal, says a Florida Atlantic University professor who has studied decades of mergers and acquisitions.

“I would say that the probability that the merger will get past regulators is relatively high,” said David Javakhadze, assistant professor of finance in FAU’s College of Business. “We found that having these political connections greatly improves the firm’s chances of closing the deal.”

Javakhadze co-authored a new study with colleagues Stephen P. Ferris, Ph.D., director of the Financial Research Institute at the University of Missouri, and Reza Houston, Ph.D., assistant professor at Indiana State University, that found appointing former politicians and regulators to boards of directors or management teams influences corporate mergers and acquisitions and improves the financial performance of the acquiring companies.

AT&T is certainly politically connected, counting among its executives and board of directors a former deputy U.S. Trade representative with the rank of ambassador; a former special advisor in the White House; a former chairman of the U.S. Federal Communications Commission; and a former chair of the White House Council of Economic Advisers.

The study found that corporations with political connections like AT&T are more likely to acquire the companies they bid on and avoid regulatory delay or denial. The more politically connected the company, the higher the merger premium paid in the deal. Returns during the announcement period show that investors recognize that bids by politically connected acquirers are more likely to create firm value. Connected corporations also enjoy superior post-merger financial and operating performance, the study found.

Examining the effect that the addition of a politically connected individual to a firm’s management team/board of directors has on the merger behavior of a sample of publicly traded companies, they manually went over proxy statements from every firm, going back decades.

They also found that connected firms make more bids and acquisitions than non-connected firms and there is an increase in bid and acquisition activity after former politicians or regulators are appointed to a firm’s board or management team.

“This might be due to the unique insights regarding issues such as regulatory process and delay, government contracting needs and procedures, or pending legislation that these political connections can provide to the acquiring firm,” they wrote in their paper, “Friends in the Right Places: The Effect of Political Connections on Corporate Merger Activity,” recently published in the Journal of Corporate Finance.

----------------------------------------FREE UBER--------------------------------------
Use our Uber Promo Code 3095J for $20 off your first ride. Enter the code in your app, or just click here.

---------------------------ABOUT BOCANEWSNOW.COM-----------------------

BocaNewsNow.com is the leading hyper-local news website based in and serving Boca Raton, Florida and South Palm Beach County. Our pages have been visited millions of times over our five year history of reporting, providing opinion and snark.

This is not a "mug shot" website. Arrest reports and mugshots are provided by law enforcement officials under Florida Statute. While we review all requests for removal, we are not obligated to remove reports that are a part of the public record.

When removal is appropriate, we do so at no charge. We do not accept payment for mugshot or arrest report deletion.

We remind our readers that an arrest is an accusation. Guilt or innocence is determined in a court of law. Email us at news (at) bocanewsnow.com or telephone 561-419-9520.

All Content Copyright © 2016 MetroDesk Media, LLC. All Rights Reserved.