Shareholder Voting and Disclosure in M&As

Abstract

We examine the effect of voting requirements in M&A transactions on managerial disclosure, information asymmetries, and voting outcomes. We find that voting requirements lead firms to provide more disclosure and in a timelier manner, including disclosure of the merger agreement, information on expected synergies, and post-merger earnings forecasts. We document a larger reduction in information asymmetries in deals subject to vote. More disclosure in the presence of voting requirements also triggers more sales from transient institutional investors. Lower information asymmetries and more transient institutional sales are associated with higher voting support and a higher likelihood that the deal is completed. Our results suggest that disclosure induced by voting requirements is informative and affects voting outcomes by changing the market valuation of the deal and the shareholder base. Evidence from falsification tests and a regression discontinuity design supports the causal interpretation of our results.

Keywords: shareholder voting, disclosure, information asymmetry, M&As

JEL Classification: G14, G34, G38