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Is European M&A Regulation Protectionist?*


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     We are grateful to Jonathan Karpoff for suggesting the central intuition of this article, to John Talbott and Marianne Bertrand (the editor) for constructive comments, and to two anonymous referees for their numerous constructive suggestions. which greatly improved the article. We thank also participants at the University of Alicante finance seminar, the EFA Conference (Maastricht, 2004) and the Second Corporate Finance day (Ghent University).


Why do regulatory authorities scrutinise mergers and acquisitions? The authorities themselves claim to be combating monopoly power and protecting consumers. But the last two decades of empirical research has found little supporting evidence for such motives. An alternative is that M&A regulation is actually designed to protect privileged firms. We provide a test of protectionism by studying whether European regulatory intervention is more likely when European firms are harmed by increased competition. Our findings raise a suspicion of protectionist motivations by the European regulator during the 1990s. The results are robust to many statistical difficulties, including endogeneity between investor valuations and regulatory actions.