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Two figures pushing jigsaw pieces together

This is the question a recent study by Professor Dimitris Petmezas and colleagues from Manchester Alliance Business School and Surrey Business School sought to answer.

What we aimed to discover

The study used terrorist attacks as an example of how exogenous shocks can impact the local business economy due to the uncertainty they leave in their wake. The researchers observed the mergers and acquisitions (M&A) activity of firms located in and around the locations of a sample of terrorist attacks in the USA between 1995 and 2015.

The attacks selected for the study were all heavily covered by major newspapers at the time, and rated on their severity by the researchers based on the number of human casualties they caused.

They then used Metropolitan Statistical Area (MSA) information and physical distance to measure each firm’s geographic proximity from the attacked locations.

Negative consequences

Several negative consequences were revealed for firms located near to terrorism-stricken areas when it comes to M&A. Professor Petmezas and colleagues stating that:

  • such firms become less attractive to potential acquirers, and as a result are less likely to receive an acquisition bid. This impact can last for as long as two years after the incident has occurred.
  • those firms with deals outstanding either when attacks occur, or up to a year afterwards are far more likely to have those deals withdrawn.
  • terrorism prompts acquiring firms to show preference for targets in different MSAs than their own, supporting the argument that target firms located in areas subject to a terrorist attack become less attractive as a result.
  • those which do secure deals often receive a lower acquisition premium, leaving them with less bargaining power, with the study also showing this translates in lower target firm stock returns and lower overall acquisition synergies.


A key element to all this is human capital, which becomes a source of terrorism-induced uncertainty which increases the real option value to delay M&A investments.

“We offer two non-mutually exclusive arguments related with target firm human capital and acquirer CEO uncertainty and fear. We initially show that terrorism intensity leads to a decrease in firm labour productivity.

另外, we show that the negative impact of terrorism intensity on acquisitions is more pronounced for firms which are highly dependent on human capital. The results also suggest that personal uncertainty and fear affect acquirer CEOs' bid decisions.” Professor Petmezas.

More information

  • Find out more about Professor Dimitris Petmezas.
  • This study was co-authored by Dr Tung Duy Nguyen and Dr Nikolaos Karampatsas, and accepted by the Management Science 杂志.
  • Read more articles on our research in the 影响中心.