Financial risk and acquirers' stockholder wealth in mergers and acquisitions

An-Sing Chen, Hsiang-Hui Chu, Pi-Hsia Hung and Miao-Sih Cheng

The North American Journal of Economics and Finance, 2020, vol. 54, issue C

Abstract: This study examines the relationship between financial risk and acquirer's stockholder wealth in mergers and acquisitions. Under this detailed methodological framework, our results reveal several new findings which were not observed in extant studies: (1) Acquirers as a group have low financial risk when measured with Altman's Z-score or default risk derived from Black-Scholes-Merton framework. (2) Default risk provides a more powerful measure on the acquirer's successful takeover probabilities than the Z-score valuation. (3) The lower default risk the acquirer has, the higher successful takeover probabilities. (4) Takeovers create value for acquirers with higher default risk.

Keywords: Default risk; M&A; Shareholder wealth; Takeover; Z-score (search for similar items in EconPapers)
JEL-codes: G30 G34 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:54:y:2020:i:c:s1062940818300834

DOI: 10.1016/j.najef.2018.07.016

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