Melbourne Accounting Research Seminar - Associate Professor Gaizka Ormazábal
Melbourne Accounting Research Seminar
The Spot Building
Level 5, room 5013
198 Berkeley St, Carlton
Gladys Lee and Like Jiang
Associate Professor Gaizka Ormazábal from IESE Business School, University of Navarra will present a MARS seminar.
Topic: Disclosure Regulation and Corporate Acquisitions
Abstract: This paper examines the effect of disclosure regulation on the market for corporate control. We exploit the implementation of the Transparency Directive of 2004, a legislation that imposed tighter disclosure requirements regarding the financial and ownership information provided by European public firms. We find a substantial drop in the number of control acquisitions after the introduction of the regulation, a decrease that is concentrated in countries with more dynamic takeover markets. We also find that takeover premiums are higher and acquirers’ stock returns at the acquisition announcement are lower under the new disclosure regime. Additional analyses show that the documented patterns appear to be driven by the tightening of the disclosure requirements for major shareholdings, especially those related to equity derivatives. Overall, our evidence suggests that tighter disclosure requirements can impose significant acquisition costs on bidders and thus slow down the market for corporate control.