|Publication||Competition policy and the profitability of corporate acquisitions|
University of Hamburg, University of Cambridge, UCLA Anderson
Paul P. Momtaz
Corporate Finance, Corporate Governance
Mergers and acquisitions, acquirer returns, bidder wealth effects, antitrust law enforcement, competition policy, merger control, law and finance
We exploit the reform of the European Commission Merger Regulation as a natural experiment to examine the relation between merger control and the profitability of corporate acquisitions. Our difference-in-differences results show that acquirer returns are lower in controlled deals, with the increase after reform-induced legal improvements suggesting a causal interpretation. Analyzing sources of value destruction, we find evidence that uncertainty about merger control decisions impedes the takeover threat, which amplifies managerial entrenchment and enables agency-motivated acquisitions. Valuation effects are more pronounced in concentrated industries, national cultures where firms are more intolerant to uncertainty, and countries with stronger law enforcement.
FMA Latin America 2017 (Mexico City), SGF 2017 (Zürich)