How does the Enforcement of Takeover Law Affect Corporate Acquisitions? An Inductive Approach

47 Pages Posted: 30 May 2016 Last revised: 15 Jan 2019

See all articles by Gishan Dissanaike

Gishan Dissanaike

University of Cambridge - Judge Business School

Wolfgang Drobetz

Hamburg University

Paul P. Momtaz

University of California, Los Angeles (UCLA)

Jörg Rocholl

ESMT European School of Management and Technology

Date Written: August 8, 2018

Abstract

This paper examines the impact of takeover law enforcement on corporate acquisitions. We use the European Takeover Directive as a natural experiment, which harmonizes takeover law across countries, while leaving its enforcement to the discretion of individual countries. Following the recommendation in Karpoff and Whittry (2018), we adopt an inductive approach and find that acquirer returns increase in countries with changes in takeover law, driven by improved target selection and lower cost of financing. The increase in acquirer returns is lower in weak enforcement jurisdictions. Overall, takeover law can mitigate agency conflicts, but its true value depends on its enforcement.

Keywords: Mergers and acquisitions, acquirer returns, law and finance, takeover law, law enforcement

JEL Classification: G30, G34, G38, K20, K22

Suggested Citation

Dissanaike, Gishan and Drobetz, Wolfgang and Momtaz, Paul P. and Rocholl, Joerg, How does the Enforcement of Takeover Law Affect Corporate Acquisitions? An Inductive Approach (August 8, 2018). Available at SSRN: https://ssrn.com/abstract=2786409 or http://dx.doi.org/10.2139/ssrn.2786409

Gishan Dissanaike

University of Cambridge - Judge Business School ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom
+441 223 339626 (Phone)
+441 223 339701 (Fax)

Wolfgang Drobetz (Contact Author)

Hamburg University ( email )

Moorweidenstrasse 18
Hamburg, 20148
Germany

Paul P. Momtaz

University of California, Los Angeles (UCLA) ( email )

405 Hilgard Avenue
Box 951361
Los Angeles, CA 90095
United States

Joerg Rocholl

ESMT European School of Management and Technology ( email )

Schlossplatz 1
Berlin
Germany

HOME PAGE: http://www.esmt.org/en/159244

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