Why do surviving targets leverage so much after an acquisistion: A governance explanation

Luminita Enache and Hubert de La Bruslerie

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Abstract: Surviving public firms after an acquisition will show important changes as the new controller generally undertakes investment and reorganization decisions to create additional value and seize synergies. An important issue is to balance a creditor's holdup mechanism with the possibility for the creditors to capture a part of the synergy gains at the target's level. We demonstrate empirically that an increase in leverage is developed to limit a transfer of value to creditors. The changes in financing structure are implemented shortly after the acquisition.

Keywords: Transfer of value; Leverage; Creditor’s holdup; Target firms; Acquisitions (search for similar items in EconPapers)
Date: 2019-05
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Published in 42nd EAA (European Accounting Association) Annual Congress, May 2019, Limassol, Cyprus

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Related works:
Working Paper: Why do Surviving Targets Leverage so Much After an Acquistion ? A Governance Explanation (2018)
Working Paper: Why do Surviving Targets Leverage so Much After an Acquistion ? A Governance Explanation (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02289101

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