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

Author

Listed:
  • Luminita Enache
  • Hubert de La Bruslerie

    (DRM - Dauphine Recherches en Management - Université Paris Dauphine-PSL - PSL - Université Paris sciences et lettres - CNRS - Centre National de la Recherche Scientifique)

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.

Suggested Citation

  • Luminita Enache & Hubert de La Bruslerie, 2019. "Why do surviving targets leverage so much after an acquisistion: A governance explanation," Post-Print hal-02289101, HAL.
    • Handle: RePEc:hal:journl:hal-02289101
    as

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