Does the Mandatory Bid Rule Add Value to Target Shareholders?

I investigate whether implementation of the mandatory bid rule-the rule that grants all shareholders the right to participate in a takeover transaction at equal terms-affects target announcement returns. I use a difference-in-differences approach and the staggered adoption of the rule across 15 European countries. I find that the rule change leads to higher target returns. In full transactions, better accounting standards and shareholder protection norms of the acquirer leads to higher target returns. In majority transactions, greater value transfer from acquirers with weak accounting standards leads to higher target returns. I find weak evidence of overpayment by acquirers.