The disciplinary role of leverage: evidence from East Asian cross-border acquirers’ returns

Robert B. Durand, Elaine Laing and Minh Thao Ngo

Finance Research Letters, 2016, vol. 18, issue C, 83-88

Abstract: We present evidence of an important disciplinary role for leverage in East Asian firms prior to making foreign acquisitions: as firms surpass an optimal leverage level, their excess leverage levels expose shareholders to agency costs which outweigh any benefits from the M&As. We find the disciplinary effect of leverage is present in both common and code law countries.

Keywords: Debt; Mergers; Acquisitions; Cross-border (search for similar items in EconPapers)
JEL-codes: G3 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:18:y:2016:i:c:p:83-88

DOI: 10.1016/j.frl.2016.04.004

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