Mandatory Disclosure and Takeovers: Evidence from Private Banks

We investigate the role of mandatory financial disclosure in the takeover market for privately held U.S. banks. Public financial information plays a critical role in the takeover market as acquirers rely on it to identify potential targets and conduct preliminary due diligence. Using a difference-in-differences research design around a regulatory disclosure mandate that changed the frequency and granularity of financial disclosure for certain banks, we find that banks with more frequent and richer disclosure are more likely to be targeted in M&A transactions than other banks. Furthermore, the impact of the disclosure mandate is less severe for banks that experience a less significant loss of publicly available information. Acquirers earn higher bid-announcement returns when targeting banks with richer and more frequent disclosures. Overall, we shed light on the critical role of mandatory financial reporting in the takeover market.

Keywords: Mandatory Disclosure, Mergers and Acquisitions, Private Banks, Regulatory Reports, Takeovers

JEL Classification: D83, G21, G28, M41

Suggested Citation: Suggested Citation

Khan, Urooj and Nissim, Doron and Wen, Jing, Mandatory Disclosure and Takeovers: Evidence from Private Banks (October 26, 2023). Available at SSRN: https://ssrn.com/abstract=4244631 or http://dx.doi.org/10.2139/ssrn.4244631