The Market for Corporate Control and Risk?taking: Evidence from Global Merger and Acquisition Laws

We examine the effect of international regulations governing market for corporate control (MCC) on firm risk-taking using staggered enactment country-level merger and acquisition (M&A) laws 34 countries. Consistent with theoretical argument deterrence, we show that MCC leads to unintended consequences by discouraging value-relevant risk-taking. Our investigation real earnings management suggests induces smoothing also provides evidence short-termism. This reduction in is associated a decrease investments, an increase cash-holding, debt employment, propensity diversify M&A. Further examination heterogeneous quality national governance institutions relationship between shows investor protection transparency levels positively moderate MCC. study highlights there could be complementary roles played institutional features encouraging