The deterrence effect of M&A regulatory enforcements

Economic, political, and public policy uncertainty affect merger and acquisition (M&A) activity. In this paper, we use Department of Justice (DOJ) and Federal Trade Commission (FTC) interventions in the M&A market to investigate whether regulatory interventions also matter. Our results support this conjecture. Using the Hoberg and Phillips (2010) similarity scores to identify product market competitors, we confirm a clear and significant DOJ/FTC regulatory enforcements' deterrence effect on future M&A transaction activity, a result robust to many alternative specifications. Additional evidence indicates that this deterrence effect is (at least partly) driven by both regulatory outcome uncertainty and regulatory intervention probability channels. Our results identify an (un)intended consequence of antitrust regulation that affects M&A activity.