Taking no chances: Lender concentration and corporate acquisitions

Luca Lin

Journal of Corporate Finance, 2022, vol. 76, issue C

Abstract: This paper shows that exogenous increases in a firm’s lender concentration induced by bank mergers significantly reduce its propensity to pursue acquisitions, particularly large public deals. The effect is driven by mergers involving lead lenders, and mainly pronounced when lenders have less bargaining power ex-ante. This suggests that the result can be explained by increased lead-lender bargaining power beyond contractual provisions. Moreover, lender mergers reduce shareholder-value-enhancing acquisitions as well as value-destroying ones. Deals that do happen are more likely to target cash-rich firms with stable cash flows, while creating no additional shareholder value. The evidence suggests that managers tend to behave more conservatively amid higher lender concentration, sometimes at the expense of forgoing good growth opportunities for shareholders.

Keywords: Creditor governance; Lender concentration; Mergers and acquisitions (search for similar items in EconPapers)
JEL-codes: G21 G30 G34 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0929119922001274
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:76:y:2022:i:c:s0929119922001274

DOI: 10.1016/j.jcorpfin.2022.102284

Access Statistics for this article

Journal of Corporate Finance is currently edited by A. Poulsen and J. Netter

More articles in Journal of Corporate Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().