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Mandatory Financial Disclosure and M&A Activity

Taking advantage of the implementation of the European Commission directives on the financial reporting of private firms, we explore the impact of mandatory financial disclosure on mergers and acquisitions. We find robust evidence that the volume of private firms becoming the target in M&A deals is positively correlated with mandatory disclosure. The analyses of deal characteristics and post-deal performance confirm our interpretation that financial disclosure increases M&A activity by reducing asymmetric information and uncertainty.