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The Impact of Government Borrowing on Corporate Acquisitions: International Evidence

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  • Azizjon Alimov

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

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.

Suggested Citation

  • Azizjon Alimov, 2021. "The Impact of Government Borrowing on Corporate Acquisitions: International Evidence," Working Papers 2021-ACF-04, IESEG School of Management, revised Mar 2023.
    • Handle: RePEc:ies:wpaper:f202104
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    References listed on IDEAS

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    More about this item

    Keywords

    government debt; mergers and acquisitions;

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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