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

Author

Listed:
  • Tingting Liu

    (Iowa State University)

  • Tao Shu

    (Chinese University of Hong Kong, Shenzhen
    Shenzhen Finance Institute)

  • Erin Towery

    (University of Georgia)

  • Jasmine Wang

    (University of Virginia)

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.

Suggested Citation

  • Tingting Liu & Tao Shu & Erin Towery & Jasmine Wang, 2024. "The role of external regulators in mergers and acquisitions: evidence from SEC comment letters," Review of Accounting Studies, Springer, vol. 29(1), pages 451-492, March.
    • Handle: RePEc:spr:reaccs:v:29:y:2024:i:1:d:10.1007_s11142-022-09723-y
    DOI: 10.1007/s11142-022-09723-y
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