Working Paper: CEPR ID: DP13458
Authors: Gaizka Ormazabal; Pietro Bonetti; Miguel Duro
Abstract: This paper examines the effect of disclosure regulation on the takeover market. We study the implementation of a recent European regulation that imposes tighter disclosure requirements regarding the financial and ownership information on public firms. We find a substantial drop in the number of control acquisitions after the implementation of the regulation, a decrease that is concentrated in countries with more dynamic takeover markets. Consistent with the idea that the disclosure requirements increased acquisition costs, we also observe that, under the new disclosure regime, target (acquirer) stock returns around the acquisition announcement are higher (lower), and toeholds are substantially smaller. Overall, our evidence suggests that tighter disclosure requirements can impose significant acquisition costs on bidders and thus slow down takeover activity.
Keywords: disclosure regulation; market for corporate control; takeover laws; proprietary costs; mergers; acquisitions
JEL Codes: G34; G38; K22
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Transparency Directive (TPD) (G38) | control acquisitions (G34) |
| control acquisitions (G34) | acquirer-target stock returns (G34) |
| Transparency Directive (TPD) (G38) | acquirer-target stock returns (G34) |
| Transparency Directive (TPD) (G38) | size of toeholds (F12) |