Download this Paper Open PDF in Browser

Mandatory Bid Rule and Takeover Announcement Returns

42 Pages Posted: 23 Feb 2014 Last revised: 11 Apr 2017

Sapnoti K. Eswar

University of Cincinnati

Date Written: April 10, 2017


I investigate whether the implementation of the mandatory bid rule affects takeover announcement returns. I use a difference-in-differences approach and the staggered adoption of the mandatory bid rule across 17 EU member countries as a quasi-experimental setup. I find that for takeovers with more agency conflicts, the implementation of the rule decreases target returns. The driving mechanism is a decrease in the frequency of fully cash-financed transactions. After the adoption of the rule, acquirers complete takeovers with similar synergies but are more likely to use stock-financing leading to a decrease in target returns and no change in acquirer returns.

Keywords: mandatory bid rule, takeover regulation,agency conflicts

JEL Classification: G32, G34, G38

Suggested Citation

Eswar, Sapnoti K., Mandatory Bid Rule and Takeover Announcement Returns (April 10, 2017). Available at SSRN: or

Sapnoti K. Eswar (Contact Author)

University of Cincinnati ( email )

Cincinnati, OH 45221-0389
United States

Paper statistics

Abstract Views