Abstract
Public financial information plays a critical role in the takeover market by helping acquirers search for and value potential targets. Using a difference-in-differences research design around a regulatory disclosure mandate that changed the granularity of financial disclosure for certain privately held banks, we find that banks with reduced disclosure are less likely to be targeted in M&A transactions. Acquirers adapt to information frictions arising from reduced disclosures by bidding for geographically proximate target banks and increasing the proportion of stock in their bids. We also find that serial acquirers are less affected by the reduced financial disclosures of targets. Furthermore, banks that reduced disclosure while earning nonbanking income or engaging in intracompany transactions were affected more severely. Overall, we highlight the critical role of mandatory financial reporting in the takeover market and its nuanced implications for bank owners, regulators, and policymakers.