Disclosure Regulation and Corporate Acquisitions

Journal of Accounting Research, Volume 58, Issue 1, March 2020

IESE Business School Working Paper No. 64025

Posted: 9 Mar 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); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 3 versions of this paper

Date Written: March 1, 2020

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: disclosure regulation; takeover market; takeover laws; mergers and acquisitions

JEL Classification: G34; G38; K22

Suggested Citation

Bonetti, Pietro and Duro, Miguel and Ormazabal, Gaizka, Disclosure Regulation and Corporate Acquisitions (March 1, 2020). Journal of Accounting Research, Volume 58, Issue 1, March 2020, IESE Business School Working Paper No. 64025, Available at SSRN: https://ssrn.com/abstract=3538463

Pietro Bonetti

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 (Contact Author)

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

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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