Loan price in mergers and acquisitions

Ning Gao, Chen Hua and Arif Khurshed

Journal of Corporate Finance, 2021, vol. 67, issue C

Abstract: We investigate loan price in mergers and acquisitions (M&As), using hand-matched loan information for a sample of 512 U.S. M&A transactions. We find the relative size of a deal constitutes a prominent determinant of the loan price measured by the all-in spread drawn (AISD). This result is robust to several specifications that address endogeneity concerns. Cross-sectional analyses show that aggravated credit risk and information uncertainty after M&A go some way towards explaining lenders' concerns over large relative deal size. Further analysis demonstrates higher AISD is associated with lower post-transaction performance, indicating loan price factors in the risk of poor post-transaction performance correctly.

Keywords: Loan price; Mergers and acquisitions (M&As); Relative deal size; Post-acquisition performance (search for similar items in EconPapers)
JEL-codes: G21 G34 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:67:y:2021:i:c:s092911992030198x

DOI: 10.1016/j.jcorpfin.2020.101754

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