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How trade credit affects mergers and acquisitions

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  • Hu, May
  • Mou, Jiayi
  • Tuilautala, Mataiasi

Abstract

This paper examines the relationship between trade credit and mergers and acquisitions for the US listed firms from 1980 to 2014. We find that firms with higher trade credit are more likely to be acquirers and acquirers with higher trade credit are more likely to use cash offers rather than stock offers to the target. In addition, target premium is lower for acquirers with higher trade credit, for whom the abnormal returns after mergers and acquisitions are higher. Our results provide the complete evidence on how trade credit affects managerial decision to merge or acquire target firms, payment method, acquisition premium and post-performance in mergers and acquisitions context.

Suggested Citation

  • Hu, May & Mou, Jiayi & Tuilautala, Mataiasi, 2020. "How trade credit affects mergers and acquisitions," International Review of Economics & Finance, Elsevier, vol. 67(C), pages 1-12.
    • Handle: RePEc:eee:reveco:v:67:y:2020:i:c:p:1-12
    DOI: 10.1016/j.iref.2019.12.004
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    Cited by:

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    2. Hossain, Mohammed Sawkat, 2021. "Merger & Acquisitions (M&As) as an important strategic vehicle in business: Thematic areas, research avenues & possible suggestions," Journal of Economics and Business, Elsevier, vol. 116(C).
    3. Burney, Robert B. & James, Hui Liang & Wang, Hongxia, 2021. "Working capital management and CEO age," Journal of Behavioral and Experimental Finance, Elsevier, vol. 30(C).
    4. Hamid Beladi & May Hu & Tan (Charlene) Lee, 2022. "International joint ventures, technology licensing and ownership structure," International Journal of Economic Theory, The International Society for Economic Theory, vol. 18(4), pages 423-439, December.
    5. Karolis Andriuškevičius & Dalia Štreimikienė, 2022. "Energy M&A Market in the Baltic States Analyzed through the Lens of Sustainable Development," Energies, MDPI, vol. 15(21), pages 1-21, October.
    6. Shen, Huayu & Liang, Yue & Li, Hanwen & Liu, Jie & Lu, Guangxi, 2021. "Does geopolitical risk promote mergers and acquisitions of listed companies in energy and electric power industries," Energy Economics, Elsevier, vol. 95(C).

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    More about this item

    Keywords

    Trade credit; Mergers and acquisitions; Market reaction;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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