Antitrust Risk and Voluntary M&A Disclosure

Abstract

This study examines whether antitrust risk affects firms’ disclosure of mergers and acquisitions (M&As). Due to regulatory exemptions, deals that fall below a size threshold escape formal antitrust scrutiny at the time of the merger. These “non-reported” deals can have important implications for the firm’s pricing power of its products in segmented and localized markets. I hypothesize that firms face a trade-off between the benefits of disclosing these deals to capital markets (i.e., capitalize the product market benefits into stock prices in a timely manner) and the potential antitrust scrutiny the voluntary disclosure can invite, which increases the probability of agencies challenging the merger. Exploiting two quasi-exogenous variations in antitrust enforcement that affect the level of antitrust risk, I find evidence of acquirers strategically managing their disclosure of horizontal and intrastate deals according to the level of antitrust risk. My findings shed light on a new determinant of voluntary disclosure: the risk of costly antitrust enforcement.

Keywords: antitrust, M&A disclosure, press releases, earnings conference calls, political costs

JEL Classification: G34, K21, L40, M41