Does the Mandatory Bid Rule Add Value to Target Shareholders

I exploit the staggered passage of adoption of the mandatory bid rule in the European Union to estimate its effect on value creation. In a sample of large block trades in seven European countries, I find that the adoption of the rule leads to an increase in the value of the target firm. I find evidence that this increase is due to a reduction in private benefits of control, and also due to higher quality of targets acquired after the rule change. I find that the rule change increases the acquisition probability and the volume of M&A activity.