Antitrust Risk and Voluntary M&A Disclosure

Abstract

This study examines how antitrust risk affects firms’ voluntary disclosure of mergers and acquisitions (M&As). I hypothesize that firms face a trade-off between the benefits of disclosing M&As 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 M&A. Exploiting two quasi-exogenous variations in antitrust enforcement that affect the level of antitrust risk, I find a negative relation between antitrust risk and three characteristics of deal press releases: length, positive tone, and discussions of product markets and competition. The findings are primarily driven by managers with short-term horizons, where the trade-off is most salient. Further analyses suggest that media coverage is the mechanism through which voluntary M&A disclosure poses antitrust risk. Collectively, my findings establish antitrust risk as a significant determinant of firms’ voluntary disclosure. 

Keywords: antitrust, M&A disclosure, press releases, political costs, disclosure trade-off

JEL Classification: G34, K21, L40, M41