This paper examines the impact of business combination (BC) laws on corporate governance and managerial performance in competitive and non-competitive industries. The authors use exogenous variation in BC laws, passed between 1985 and 1991, to study their effects. They find that while firms in non-competitive industries experience a significant drop in operating performance after the laws' passage, firms in competitive industries do not. The study supports the "quiet-life" hypothesis, suggesting that competition mitigates managerial slack by increasing input costs, wages, and overhead costs, particularly in non-competitive industries. Event studies around the dates of the first newspaper reports about the BC laws also show a significant stock price decline for firms in non-competitive industries, while the impact is small and insignificant for firms in competitive industries. The findings suggest that competition reduces the opportunity for managerial slack, particularly in non-competitive industries, where competitive pressure enforces discipline on management.This paper examines the impact of business combination (BC) laws on corporate governance and managerial performance in competitive and non-competitive industries. The authors use exogenous variation in BC laws, passed between 1985 and 1991, to study their effects. They find that while firms in non-competitive industries experience a significant drop in operating performance after the laws' passage, firms in competitive industries do not. The study supports the "quiet-life" hypothesis, suggesting that competition mitigates managerial slack by increasing input costs, wages, and overhead costs, particularly in non-competitive industries. Event studies around the dates of the first newspaper reports about the BC laws also show a significant stock price decline for firms in non-competitive industries, while the impact is small and insignificant for firms in competitive industries. The findings suggest that competition reduces the opportunity for managerial slack, particularly in non-competitive industries, where competitive pressure enforces discipline on management.