Mandatory Bid Rule and Takeover Announcement Returns
43 Pages Posted: 23 Feb 2014 Last revised: 13 May 2018
Date Written: May 8, 2018
I investigate whether implementation of the mandatory bid rule affects target announcement returns. I use a difference-in-differences approach and the staggered adoption of the rule across 15 European countries. I find that the rule change leads to higher target returns in majority transactions, or acquisitions of controlling block of target shares, and full transactions, acquisitions of 100\% of target shares. In full transactions, better accounting standards and share-holder protection norms of the acquirer leads to higher target returns. In majority transactions, greater value transfer from acquirers with weak accounting standards leads to higher target returns. I find weak evidence of overpayment by acquirers.
Keywords: mandatory bid rule, takeover regulation, accounting standards, shareholder protection
JEL Classification: G32, G34, G38
Suggested Citation: Suggested Citation