Working Paper: NBER ID: w29655
Authors: John M. Barrios; Thomas G. Wollmann
Abstract: Antitrust authorities search public documents to discover anticompetitive mergers. Thus, investor disclosures may alert them to deals that would otherwise escape scrutiny, creating disincentives for managers to divulge transactions. We study this behavior in publicly traded US companies. First, we estimate a regression discontinuity that exploits mandatory disclosure thresholds stipulated by securities law. We find that releasing information to investors poses antitrust risk. Second, we present a method for measuring undisclosed merger activity that relies on financial accounting reporting requirements. We find that undisclosed mergers total $2.3 trillion between 2002 and 2016.
Keywords: Antitrust; Investor Disclosures; Mergers
JEL Codes: G3; G34; L0; L4; L40; M4
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Undisclosed mergers (G34) | Significant portion of merger activity (G34) |
| Investor disclosures (G24) | Antitrust risk (K21) |
| Antitrust risk (K21) | Managers refrain from reporting certain anticompetitive deals (L14) |
| Transaction value to acquirer assets ratio exceeds 10% (G32) | Share of horizontal mergers decreases (L41) |
| Increased disclosure (G38) | Reduction in horizontal mergers (L42) |