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Compulsory or Voluntary Pre-Merger Notification? Theory and Some Evidence

Posted: 25 Jan 2010  

Chongwoo Choe

Monash University - Department of Economics

Chander Shekhar

University of Melbourne; Financial Research Network (FIRN)

Date Written: January 24, 2010


We compare the prevailing system of compulsory pre-merger notification with the Australian system of voluntary pre-merger notification. It is shown that, for a non-trivial set of parameter values, a perfect Bayesian equilibrium exists in mixed strategies in which the regulator investigates un-notified mergers with probability less than one and the parties choose notification with probability less than one. Thanks to the signaling opportunity that arises when notification is voluntary, voluntary notification leads to lower enforcement costs for the regulator and lower notification costs for the merging parties. Some of the theoretical predictions are supported by exploratory empirical tests using merger data from Australia. Overall, our results suggest that voluntary merger notification may achieve objectives similar to those achieved by compulsory systems at lower costs to the merging parties as well as to the regulator.

Keywords: Merger Regulation, Pre-Merger Notification, Abnormal Returns

JEL Classification: D21, G34, K21, L40

Suggested Citation

Choe, Chongwoo and Shekhar, Chander, Compulsory or Voluntary Pre-Merger Notification? Theory and Some Evidence (January 24, 2010). International Journal of Industrial Organization, Vol. 28, No. 1, 2010. Available at SSRN:

Chongwoo Choe (Contact Author)

Monash University - Department of Economics ( email )

Department of Economics
PO Box 197
Caulfield East, Victoria 3145
+61 2 9903 1125 (Phone)
+61 2 9903 1128 (Fax)

Chander Shekhar

University of Melbourne ( email )

185 Pelham Street, Carlton, Victoria 3053
Melbourne, Victoria 3010

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane


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