Regulation and target takeover returns: Is there a link?

We investigate the impact that stronger regulation has on takeover returns in New Zealand. This is an ideal laboratory as New Zealand moved from an environment of relatively weak takeover regulation to one governed by a prescriptive Takeovers Code in several defined steps. The effect of New Zealand's progressively more prescriptive regulatory regime is to shift some of the bargaining power from the acquirers towards the targets. Consistent with targets' increased bargaining power; we find targets extract greater rewards from acquirers during periods of stronger regulation. The higher announcement return and premium is robust to the inclusion of numerous control variables.