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Shu Tao: The Role of External Regulators in Mergers and Acquisitions: Evidence from SEC Comment Letters
Release time:2022-04-15Views:724

Information transparency is crucial to the efficiency and fairness of mergers and acquisitions (M&As). However, information asymmetry in M&As is still a severe problem that cannot be fully addressed by internal mechanisms alone. Based on this issue, Professor Shu Tao at the School of Management and Economics of The Chinese University of Hong Kong, Shenzhen and the collaborators examine the role of the SEC review process, an external regulator, in M&A transactions. The study shows that the SEC review process (i.e., disclosure regulations) can reduce information asymmetry in M&As, alleviate shareholders’ disagreement, increases the likelihood of deal completion and offer price revisions, and thus facilitate the completion of M&A transactions. The research was recently accepted by Review of Accounting Studies, an international top journal.


Tingting Liu

Debbie and Jerry Ivy College of Business, Iowa State University

Erin Towery

Terry College of Business, University of Georgia

Jasmine Wang

McIntire School of Commerce, University of Virginia


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.