When subsidies build empires, not value

Abstract We examine how government subsidies alter corporate control activity in publicly traded U.S. firms. Using a panel from 2000–2022 that links Good Jobs First subsidy records with Bloomberg merger and acquisition (M&A) data, we find that subsidies increase firms’ likelihood of becoming acquirers while reducing their probability of becoming acquisition targets. Acquisitions of subsidized targets generate negative acquirer returns, indicating possible value destruction, consistent with free cash flow theory. Subsidized firms are also more likely to divest assets around M&A activity than non‐subsidized firms. Our results reveal how subsidies unintentionally alter recipient M&A incentives and dampened market discipline.