 Cross-border M&As and credit risk: Evidence from the CDS marketIuliana Ismailescu and Burcin Col Journal of Empirical Finance, 2022, vol. 66, issue C, 51-73 Abstract: This paper examines the impact of cross-border acquisition announcements on the U.S. bidders’ credit risk. On average, we find a significant increase in bidders’ rating-adjusted credit default swap (CDS) spreads around an acquisition announcement in an emerging market (EM), but no marked change if the target firm is from a developed market. The EM result is driven primarily by majority but not full control transactions, and by risky acquirers. We also find evidence of wealth transfer from acquirers’ bondholders to shareholders in EM acquisitions, which is stronger when transactions result in majority but not full control of the target or when acquirers are rated sub-investment grade. We attribute the rise in the U.S. bidders’ credit risk around announcements of majority but not full control EM acquisitions to the weaker legal environment and creditor protection in the target nation relative to those in the U.S. Keywords: Cross-border M&As; CDS spreads; Emerging markets; Investor protection; Wealth transfer (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:66:y:2022:i:c:p:51-73 DOI: 10.1016/j.jempfin.2021.12.002 Access Statistics for this article Journal of Empirical Finance is currently edited by R. T. Baillie, F. C. Palm, Th. J. Vermaelen and C. C. P. Wolff More articles in Journal of Empirical Finance from Elsevier |
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