Does Regulatory Exposure Create M&A Synergies?

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See all articles by Eliezer M. Fich

Eliezer M. Fich

Drexel University - Department of Finance

Thomas P. Griffin

Villanova University - Department of Finance & Real Estate

Joseph Kalmenovitz

Drexel University

Date Written: November 18, 2021

Abstract

We study the impact of regulation on acquisition investment, using a novel firm-level measure of exposure to all federal regulations. Highly regulated companies issue more acquisition bids, invest more in those transactions, and earn higher M&A announcement returns. Moreover, highly regulated acquirers exhibit better long-term performance, greater M&A synergies, and a significant reduction in their regulatory exposure after merger completion. The benefits are stronger in deals with small transaction values and in those involving private targets. Overall, our findings uncover a new link between M&A and regulation, highlighting synergy opportunities which materially affect corporate investment choices.

Keywords: Regulatory exposure, Mergers and acquisitions, Investment, Firm performance

JEL Classification: G18, G34, G38, K23, L25, L51, M48

Suggested Citation

Fich, Eliezer M. and Griffin, Thomas and Kalmenovitz, Joseph, Does Regulatory Exposure Create M&A Synergies? (November 18, 2021). Available at SSRN: https://ssrn.com/abstract=

Eliezer M. Fich

Drexel University - Department of Finance ( email )

LeBow College of Business
3220 Market Street – 11th Floor
Philadelphia, PA 19104
(215) 895-2304 (Phone)

Thomas Griffin

Villanova University - Department of Finance & Real Estate ( email )

United States

HOME PAGE: http://www.thomaspgriffin.com

Joseph Kalmenovitz (Contact Author)

Drexel University ( email )

Philadelphia, PA 19104
United States

HOME PAGE: http://sites.google.com/view/jkalmenovitz

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