Impact of Economic Policy Uncertainty on Merger and Acquisition Decisions: Evidence from Chinese A-Shares

Economic policy uncertainty (EPU) has emerged as a critical factor influencing capital market dynamics and corporate strategic decisions. This study employs the latest EPU index and M&A transaction data from Chinese A-share listed companies spanning from 2014 to 2018 to empirically investigate the impact of EPU on corporate behavior within China’s capital market. The empirical results reveal that EPU significantly inhibits firms’ willingness to undertake M&A decisions. Further analysis indicates that EPU exerts this inhibitory effect primarily by undermining managerial confidence and then reducing corporate risk-taking propensity. This study contributes to the literature by extending the analysis of EPU’s impact to the micro-level behavior of managers particularly in the context of M&A decisions. The findings provide novel empirical evidence for understanding how policy uncertainty shapes corporate strategy in emerging markets and offer insights for policymakers and corporate managers.