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The Impact of the Dodd-Frank Act on Acquisition Activity

Author

Listed:
  • Anup Basnet

    (UNIS - University of Surrey)

  • Magnus Blomkvist

    (EDHEC - EDHEC Business School - UCL - Université catholique de Lille)

  • Karl Felixson

    (Hanken School of Economics [Helsinki])

  • Eva Liljeblom
  • Hitesh Vyas

    (Audencia Business School)

Abstract

The Dodd-Frank Act in 2010 increased ex ante downgrade threats without changing credit-rated firms' underlying credit quality. We show that the act had negative impacts on credit-rated firms' acquisition activities, especially among speculative-grade firms as they face greater downgrade-induced costs. The more selective acquisition strategies led to higher announcement returns and greater postacquisition upgrade probabilities. Consistent with firms refraining from taking on overall acquisition risk rather than financial risk, we show significant reductions in both cash-and stock-settled dealmaking after the Dodd-Frank Act. In sum, our study highlights that increased legal stringency on credit rating agencies has important spillover effects on firms' mergers and acquisitions activities.

Suggested Citation

  • Anup Basnet & Magnus Blomkvist & Karl Felixson & Eva Liljeblom & Hitesh Vyas, 2026. "The Impact of the Dodd-Frank Act on Acquisition Activity," Post-Print hal-05741138, HAL.
    • Handle: RePEc:hal:journl:hal-05741138
    DOI: 10.1086/737770
    Note: View the original document on HAL open archive server: https://hal.science/hal-05741138v1
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    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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