Strategic merger decisions across business cycles: Evidence from bidders' time-varying appetite for operating leverage

Chune Young Chung, Seok-Kyun Hur and Kainan Wang

International Review of Economics & Finance, 2017, vol. 47, issue C, 143-158

Abstract: In this study, we examine how bidders' appetite for their targets' operating leverage affects merger activities, and whether this appetite varies throughout the business cycle. We find that the association between a firm's operating leverage and the likelihood of it becoming a target or an acquirer—as well as the deal premium, the bidder's cumulative abnormal returns around the deal announcement date, and the bidder's long-run buy-and-hold abnormal returns—depend on the business cycle. The time-varying effects of operating leverage on merger decisions are strategic and consistent with their time-varying benefits and costs.

Keywords: Strategic merger; Operating leverage; Business cycle; Firm performance (search for similar items in EconPapers)
JEL-codes: G32 G34 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1059056016302350
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:47:y:2017:i:c:p:143-158

DOI: 10.1016/j.iref.2016.10.010

Access Statistics for this article

International Review of Economics & Finance is currently edited by H. Beladi and C. Chen

More articles in International Review of Economics & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().