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Why do surviving targets leverage so much after an acquisistion: A governance explanation

Enache, Luminita; de La Bruslerie, Hubert (2019), Why do surviving targets leverage so much after an acquisistion: A governance explanation, 42nd EAA (European Accounting Association) Annual Congress, 2019-05, Limassol, Cyprus

Type
Communication / Conférence
Date
2019
Conference title
42nd EAA (European Accounting Association) Annual Congress
Conference date
2019-05
Conference city
Limassol
Conference country
Cyprus
Metadata
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Author(s)
Enache, Luminita

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