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Easing Financing and M&A Investment Constraints: The Role of Corporate Industrial Diversification

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  • Henry Agyei-Boapeah

    (Accounting & Finance Group, The York Management School, University of York Freboys Lane)

Abstract

This article examines how corporate industrial diversification could ease, or even eliminate firms' financing and investment constraints. Drawing from the trade-off theory of capital structure, the paper argues and finds that overleveraged firms do face significant investment constraints in the form of a reduced ability to initiate and complete M&As. Furthermore, the paper shows that the financing and investment constraints are reduced when firms undertake diversifying acquisitions compared to when they pursue related acquisitions. Overall, the findings improve our understanding of how the perceived risks/benefits associated with planned investments do influence ex-ante corporate financing/investment constraints.

Suggested Citation

  • Henry Agyei-Boapeah, 2017. "Easing Financing and M&A Investment Constraints: The Role of Corporate Industrial Diversification," Annals of Economics and Finance, Society for AEF, vol. 18(2), pages 277-290, November.
    • Handle: RePEc:cuf:journl:y:2017:v:18:i:2:agyei-boapeah
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    References listed on IDEAS

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    Cited by:

    1. Agyei-Boapeah, Henry, 2019. "Foreign acquisitions and firm performance: The moderating role of prior foreign experience," Global Finance Journal, Elsevier, vol. 42(C).

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    More about this item

    Keywords

    Corporate industrial diversification; Leverage deficit; Overleverage; Financing constraint; M&As;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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