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The impact of European Commission merger regulation on US domestic M&As

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  • Deshpande, Shreesh
  • Svetina, Marko
  • Zhu, Pengcheng

Abstract

We study the wealth effects of the European Commission’s (EC) merger regulation on the shareholders of the acquiring and target firms in US domestic mergers, as well as their international rivals. We find that regulatory investigation and oversight by the EC in purely domestic US mergers engendered a significant financial cost to the merger deals. Over the 1990–2010 sample period, the combined firms (acquirer and target) in the average deal in our sample lost about $8 billion in shareholder value. Rival firms in the US, EU countries, and other international markets were also financially penalized by EC intervention. Our results provide evidence of the negative impact of extraterritorial regulatory intervention (“economic nationalism”) in the mergers and acquisitions market.

Suggested Citation

  • Deshpande, Shreesh & Svetina, Marko & Zhu, Pengcheng, 2016. "The impact of European Commission merger regulation on US domestic M&As," Journal of Multinational Financial Management, Elsevier, vol. 36(C), pages 1-15.
    • Handle: RePEc:eee:mulfin:v:36:y:2016:i:c:p:1-15
    DOI: 10.1016/j.mulfin.2016.05.001
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    Cited by:

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    2. Joseph A. Clougherty & Nan Zhang, 2021. "Foreign investor reactions to risk and uncertainty in antitrust: U.S. merger policy investigations and the deterrence of foreign acquirer presence," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 52(3), pages 454-478, April.
    3. Wanke, Peter & Maredza, Andrew & Gupta, Rangan, 2017. "Merger and acquisitions in South African banking: A network DEA model," Research in International Business and Finance, Elsevier, vol. 41(C), pages 362-376.
    4. Clougherty, Joseph A. & Zhang, Nan, 2023. "Antitrust policy and inward FDI: The impact of policy risk and uncertainty on U.S. inward-FDI flows," International Business Review, Elsevier, vol. 32(4).
    5. Goodness C. Aye & Giray Gozgor & Rangan Gupta, 2020. "Dynamic and Asymmetric Response of Inequality to Income Volatility: The Case of the United Kingdom," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 147(3), pages 747-762, February.
    6. Alcalde, Nuria & Powell, Ronan, 2022. "Government intervention in European mergers and acquisitions," The North American Journal of Economics and Finance, Elsevier, vol. 61(C).

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    More about this item

    Keywords

    Mergers and acquisitions; EU regulation; Shareholder value; Event study;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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