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

Tingting Liu, Tao Shu, Erin Towery, Jasmine Wang

Review of Accounting Studies · 2024 · Volume 29 · Issue 1

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.

Keywords

SEC, Comment letters, M&A, Information asymmetry, Deal completion, Offer price revision, Deal duration

Enable JavaScript for citation tools and additional paper interactions.