The Role of External Regulators in Mergers and Acquisitions: Evidence from SEC Comment Letters

60 Pages Posted: 7 Oct 2019 Last revised: 14 Feb 2022

See all articles by Tingting Liu

Tingting Liu

Iowa State University ; European Corporate Governance Institute (ECGI)

Tao Shu

The Chinese University of Hong Kong (CUHK) - CUHK Business School

Erin Towery

University of Georgia

Jasmine Wang

University of Virginia

Date Written: February 10, 2022

Abstract

This study examines the role of the Securities and Exchange Commission (SEC) in mergers and acquisitions (M&As) involving publicly traded target firms. We find that deals receiving comment letters have an increased likelihood of deal completion and deal price revision, consistent with the SEC review process reducing information asymmetry, albeit at the cost of delaying the M&A process. Further analyses suggest that the SEC review process generates new value-relevant information via firms’ disclosure amendments in response to comment letters. We address endogeneity concerns using multiple approaches. Our findings that the SEC review process reduces information asymmetry in M&As provide new insight into the real economic consequences of disclosure regulation.

Keywords: Information asymmetry; M&A; SEC; Comment letters; Shareholder welfare; Corporate governance; Deal outcomes

JEL Classification: M41; G34; K22

Suggested Citation

Liu, Tingting and Shu, Tao and Towery, Erin and Wang, Jasmine, The Role of External Regulators in Mergers and Acquisitions: Evidence from SEC Comment Letters (February 10, 2022). Available at SSRN: https://ssrn.com/abstract=3464069 or http://dx.doi.org/10.2139/ssrn.3464069

Tingting Liu

Iowa State University ( email )

2330 Gerdin Business Building
Ames, IA 50011
United States

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Tao Shu

The Chinese University of Hong Kong (CUHK) - CUHK Business School ( email )

Cheng Yu Tung Building
12 Chak Cheung Street
Shatin, N.T.
Hong Kong

Erin Towery

University of Georgia ( email )

Terry College of Business
Athens, GA 30602-6254
United States

Jasmine Wang (Contact Author)

University of Virginia ( email )

125 Ruppel Dr
306 Rouss and Robertson Hall
Charlottesville, VA 22903
United States

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