Event summary

We investigate the wealth effects of the Takeover Bids Directive, enacted by European Union countries, on mergers and acquisitions. The main goal of the directive is to protect target minority shareholders by restricting anti-takeovers provisions that entrench target managers or by discouraging aggressive bidders. We test our hypotheses using a difference-in-differences methodology with a treatment sample of public acquisitions within the European Union (EU) and a control sample of public acquisitions from the rest of the world. Our results suggest diverse effects of the regulation across treatment countries. We find that acquirers from countries with better shareholder protection engage in more value-enhancing acquisitions post adoption of the Takeover Bids Directive. Our evidence suggests that the directive facilitates better-governed EU acquirers to engage in deals with larger synergies, measured by the acquisition combined announcement returns.