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The Impact of Government Borrowing on Corporate Acquisitions: International Evidence

Azizjon Alimov ()
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Azizjon Alimov: IESEG School of Management, UMR 9221 - LEM - Lille Economie Management, F-59000 Lille, France

No 2021-ACF-04, Working Papers from IESEG School of Management

Abstract: This paper examines how variation in the supply of government debt affects corporate acquisition activity. Using data from 50 countries from 1991 to 2017, the paper finds that government debt issuance is strongly negatively associated with acquisition activity at the firm and aggregate levels. In response to increases in government borrowing, firms appear to make more value-enhancing deals. These effects are stronger for cash-financed deals and for financially stronger firms. Collectively, these findings suggest that rising government debt leads to “real crowding out” by affecting the firms’ ability to make large investments.

Keywords: government debt; mergers and acquisitions (search for similar items in EconPapers)
JEL-codes: G34 H63 (search for similar items in EconPapers)
Pages: 47
Date: 2021-08, Revised 2023-03
New Economics Papers: this item is included in nep-cfn, nep-fdg, nep-isf and nep-mac
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