HEC Research Papers Series,
HEC Paris

Abstract: We examine whether and how the implementation of national security policies by the Committee on Foreign Investment in the United States (CFIUS) affects corporate investment. CFIUS can block a foreign takeover of a US company when its closing threatens to impair the national security of the United States. On a sample of 41,918 firm-year observations (6,192 US incorporated listed firms) over the 2008–2019 period, we find that CFIUS interventions reduce corporate investment by firms in industries of national security interest. We also document a decrease in corporate investment following the 2016 US presidential election, which increased the likelihood of CFIUS interventions. The effects are more pronounced among firms that are financially constrained and more exposed to foreign investments. Our results may be of interest to regulators who have recently adopted CFIUS-like mechanisms to protect their critical assets from foreign takeovers.

Keywords: National Security; CFIUS; Corporate Investment

JEL-codes: D22; F38; G18

53 pages, July 17, 2023

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