The (Un)Intended Consequences of M&A Regulation

46 Pages Posted: 31 Mar 2020

See all articles by Eric de Bodt

Eric de Bodt

NHH-Caltech

Jean-Gabriel Cousin

Univ. Lille, ULR 4112 - LSMRC

Micah S. Officer

Loyola Marymount University - Department of Finance

Richard Roll

California Institute of Technology

Date Written: March 5, 2020

Abstract

Economic (Bhagwat, Dam and Harford, 2016), political (Cao, Li and Liu, 2019), and policy (Nam and Hieu, 2017; Bonaime, Gulen and Ion, 2018) uncertainty affect merger and acquisition (M&A) activity. In this paper, we use Department of Justice (DOJ) and Federal Trade Commission (FTC) interventions in the M&A market to investigate whether regulatory uncertainty also matters. Our results support this conjecture. Using the Hoberg and Phillips (2010) similarity scores to identify product market competitors, we uncover a clear and significant DOJ/FTC intervention deterrence effect on future M&A transaction attempts. This deterrence effect is driven by the length of the investigation procedure, a principal factor that exacerbates regulatory uncertainty. Our results identify an (un)intended channel through which M&A regulation hampers efficient resources allocation.

Keywords: mergers and acquisitions; regulation; uncertainty; deterrence

JEL Classification: G34

Suggested Citation

de Bodt, Eric and Cousin, Jean-Gabriel and Officer, Micah S. and Roll, Richard W., The (Un)Intended Consequences of M&A Regulation (March 5, 2020). Available at SSRN: https://ssrn.com/abstract=3549230 or http://dx.doi.org/10.2139/ssrn.3549230

Eric De Bodt (Contact Author)

NHH-Caltech ( email )

18B AVENUE BECHET
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Belgium
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Jean-Gabriel Cousin

Univ. Lille, ULR 4112 - LSMRC ( email )

1 place Déliot - BP381
Lille Cedex, 59020
France
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33-3-2090-7629 (Fax)

Micah S. Officer

Loyola Marymount University - Department of Finance ( email )

Los Angeles, CA 90045
United States

Richard W. Roll

California Institute of Technology ( email )

1200 East California Blvd
Mail Code: 228-77
Pasadena, CA 91125
United States
626-395-3890 (Phone)
310-836-3532 (Fax)

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