Lender effects on gains from mergers and acquisitions

Nadia Massoud, Keke Song and Nam Tran

Journal of Banking & Finance, 2024, vol. 163, issue C

Abstract: We employ textual analysis to identify mergers and acquisitions (M&As) financed by corporate loans and show that acquirer announcement returns are higher in loan-financed M&As. Utilizing an instrumental variable approach and a quasi-natural experiment, we provide evidence that lenders contribute to the higher acquirer returns in loan-financed M&As. Our findings support the view that lenders differ in their ability to screen and monitor borrowers and that their ability is persistent. We also find evidence that lenders’ participation in the M&A market can resolve uncertainty about M&A deal quality, improve corporate governance by preventing value-destroying M&As, and provide long-term monitoring benefits to acquirer shareholders.

Keywords: M&As; Loan financing; Corporate governance; Lending relationship; Uncertainty resolution; Lender ability; Textual analysis (search for similar items in EconPapers)
JEL-codes: D82 G14 G21 G34 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:163:y:2024:i:c:s0378426624000888

DOI: 10.1016/j.jbankfin.2024.107171

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