The role of external regulators in mergers and acquisitions: evidence from SEC comment letters

Tingting Liu (), Tao Shu (), Erin Towery () and Jasmine Wang ()
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Tingting Liu: Iowa State University
Tao Shu: Chinese University of Hong Kong, Shenzhen
Erin Towery: University of Georgia
Jasmine Wang: University of Virginia

Review of Accounting Studies, 2024, vol. 29, issue 1, No 13, 492 pages

Abstract: Abstract This study examines the role of the Securities and Exchange Commission (SEC) in mergers and acquisitions (M&As) involving publicly traded target firms. We find that deals receiving comment letters have an increased likelihood of deal completion and deal price revision, consistent with the SEC review process reducing information asymmetry, albeit at the cost of delaying the M&A process. Further analyses suggest that the SEC review process generates new value-relevant information via firms’ disclosure amendments in response to comment letters. We address endogeneity concerns using multiple approaches. Our findings that the SEC review process reduces information asymmetry in M&As provide new insight into the real economic consequences of disclosure regulation.

Keywords: SEC; Comment letters; M&A; Information asymmetry; Deal completion; Offer price revision; Deal duration; M41; G34; K22 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s11142-022-09723-y

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