Too much to learn? The (un)intended consequences of RegTech development on mergers and acquisitions

Ming Gu, Dongxu Li and Xiaoran Ni

Journal of Corporate Finance, 2022, vol. 76, issue C

Abstract: Regulatory and technological (RegTech) developments have been changing the nature of financial markets in recent decades. This paper documents the real effects of RegTech in the market of corporate control. Exploiting the staggered implementation of the EDGAR system from 1993 to 1996 as quasi-exogenous RegTech shocks, we find that RegTech developments reduce firm acquisitiveness, especially for growth firms, solo-bidder deals, and stock-based acquisitions. Our main findings still hold when employing the stack-cohort approach to address concerns regarding biased staggered DiD estimators. In addition, EDGAR implementation discourages informed trading and lowers the acquirers' announcement returns. Overall, our deal-level analyses show how RegTech development matters for firm investment decisions with more granularities. Our paper differs from but complements recent empirical evidence that EDGAR implementation increases the level of overall investment, suggesting that dampened managerial learning induces firms to switch from highly risky and uncertain projects (M&As) to routine projects with less uncertainty (capital expenditures).

Keywords: Regulation technology (RegTech); EDGAR; Mergers and acquisitions (M&As); Firm acquisitiveness; Price efficiency (search for similar items in EconPapers)
JEL-codes: G18 G31 G34 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0929119922001195
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:76:y:2022:i:c:s0929119922001195

DOI: 10.1016/j.jcorpfin.2022.102276

Access Statistics for this article

Journal of Corporate Finance is currently edited by A. Poulsen and J. Netter

More articles in Journal of Corporate Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().