Does Regulatory Exposure Create M&A Synergies?

38 Pages Posted: 6 Jan 2022

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

University of Rochester - Simon Business School

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=3966359 or http://dx.doi.org/10.2139/ssrn.3966359

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)

HOME PAGE: http://https://sites.google.com/view/eliezerfich

Thomas Griffin

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

United States

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

Joseph Kalmenovitz (Contact Author)

University of Rochester - Simon Business School ( email )

Rochester, NY 14627
United States

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

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
164
Abstract Views
696
rank
255,173
PlumX Metrics