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The Corporate Acquisition Policy of Financially Distressed Firms

  • Dror Parnes
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    The paper examines a unique motive for corporate acquisitions among distressed firms: the desire to enhance creditworthiness by both the acquirer and the acquired firms. I develop a theoretical model of the creditworthiness conditions necessary for corporate acquisitions and identify the optimal policy in searching for an acquirer. I distinguish between strategic and nonstrategic acquisitions and find the necessary conditions and most favorable policy for a strategic acquisition to evolve. I demonstrate the importance of the cost of finding an acquirer, the impact of sharing bargaining leverage, and the economic significance of credit quality for the success of the accord. Copyright (c) 2009, The Eastern Finance Association.

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    File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1540-6288.2009.00232.x
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    Article provided by Eastern Finance Association in its journal Financial Review.

    Volume (Year): 44 (2009)
    Issue (Month): 4 (November)
    Pages: 603-623

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    Handle: RePEc:bla:finrev:v:44:y:2009:i:4:p:603-623
    Contact details of provider: Web page: http://www.easternfinance.org/

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