Regulatory Burden and M&A Activity

45 Pages Posted: 6 Jan 2022 Last revised: 30 Sep 2023

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: September 29, 2023

Abstract

Using a novel measure of exposure to federal regulations, we study the impact of firm-level regulatory burden on M&A activity. Firms respond to increased regulation by engaging in more M&A activity, on average, but the effect hinges crucially on firm size. Large firms increase acquisition investment and earn higher announcement returns. In contrast, small firms become more likely to sell out, particularly to strategic acquirers that have a high degree of regulatory overlap. Overall, our findings uncover an unintended consequence of federal regulation that advantages large firms and influences the composition of U.S. industries.

Keywords: Mergers, Acquisitions, Corporate regulation

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

Suggested Citation

Fich, Eliezer M. and Griffin, Thomas and Kalmenovitz, Joseph, Regulatory Burden and M&A Activity (September 29, 2023). 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

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