Disclosure Regulation and Corporate Acquisitions

90 Pages Posted: 23 Jan 2019 Last revised: 27 Jan 2020

See all articles by Pietro Bonetti

Pietro Bonetti

University of Navarra, IESE Business School

Miguel Duro

IESE Business School

Gaizka Ormazabal

University of Navarra, IESE Business School; European Corporate Governance Institute (ECGI)

Multiple version iconThere are 3 versions of this paper

Date Written: January 2019

Abstract

This paper examines the effect of disclosure regulation on the takeover market. We study the implementation of a recent European regulation that imposes tighter disclosure requirements regarding the financial and ownership information on public firms. We find a substantial drop in the number of control acquisitions after the implementation of the regulation, a decrease that is concentrated in countries with more dynamic takeover markets. Consistent with the idea that the disclosure requirements increased acquisition costs, we also observe that, under the new disclosure regime, target (acquirer) stock returns around the acquisition announcement are higher (lower), and toeholds are substantially smaller. Overall, our evidence suggests that tighter disclosure requirements can impose significant acquisition costs on bidders and thus slow down takeover activity.

Keywords: Acquisitions, Disclosure regulation, market for corporate control, mergers, Proprietary costs, Takeover laws

JEL Classification: G34, G38, K22

Suggested Citation

Bonetti, Pietro and Duro, Miguel and Ormazabal, Gaizka, Disclosure Regulation and Corporate Acquisitions (January 2019). CEPR Discussion Paper No. DP13458. Available at SSRN: https://ssrn.com/abstract=3319776

Pietro Bonetti (Contact Author)

University of Navarra, IESE Business School ( email )

Avenida Pearson 21
Barcelona, 08034
Spain

Miguel Duro

IESE Business School ( email )

Avenida Pearson 21
Barcelona, 08034
Spain

Gaizka Ormazabal

University of Navarra, IESE Business School ( email )

Avenida Pearson 21
Barcelona, 08034
Spain

European Corporate Governance Institute (ECGI) ( email )

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

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