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Why do surviving targets leverage so much after an acquisistion? A governance explaination

de La Bruslerie, Hubert (2018), Why do surviving targets leverage so much after an acquisistion? A governance explaination, AFFI 35th International Conference, Paris, FRANCE

Type
Communication / Conférence
Date
2018
Conference title
AFFI 35th International Conference
Conference city
Paris
Conference country
FRANCE
Metadata
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Author(s)
de La Bruslerie, Hubert
Dauphine Recherches en Management [DRM]
Abstract (EN)
Surviving public firms after an acquisition will show important changes as the new controller generally undertakes investment and reorganization decisions to create additional value and seize synergies. An important issue is to balance a creditor’s holdup mechanism with the possibility for the creditors to capture a part of the synergy gains at the target’s level. We demonstrate empirically that an increase in leverage is developed to limit a transfer of value to creditors. The changes in financing structure are implemented shortly after the acquisition.
Subjects / Keywords
Transfer of value; Leverage; Creditor’s holdup; Target firms; Acquisitions
JEL
M10 - General
G34 - Mergers; Acquisitions; Restructuring; Corporate Governance