Corporate mergers and acquisitions: A strategic approach to mitigate expected default frequency

Haoyang Wu, Ziyan Jiao, Shipeng Wang and Zhiruo Wu

Finance Research Letters, 2024, vol. 64, issue C

Abstract: This study investigates the influence of corporate mergers and acquisitions on debt default risk by analyzing a dataset of 14,990 A-share listed companies from 2010 to 2021. The results demonstrate that corporate mergers and acquisitions effectively mitigate expected default frequency, a conclusion that withstands a variety of robustness checks. Through mechanism testing, it's found that mergers and acquisitions alleviate corporate financing constraints and boost information transparency, subsequently lowering debt default risk. The heterogeneity analysis further reveals that this mitigating effect is particularly pronounced in younger companies, those with weaker internal governance, and companies situated in less marketized regions.

Keywords: Mergers and acquisitions; Expected default frequency; Corporate; China (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:64:y:2024:i:c:s154461232400446x

DOI: 10.1016/j.frl.2024.105416

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