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Lender effects on gains from mergers and acquisitions

Author

Listed:
  • Massoud, Nadia
  • Song, Keke
  • Tran, Nam

Abstract

We employ textual analysis to identify mergers and acquisitions (M&As) financed by corporate loans and show that acquirer announcement returns are higher in loan-financed M&As. Utilizing an instrumental variable approach and a quasi-natural experiment, we provide evidence that lenders contribute to the higher acquirer returns in loan-financed M&As. Our findings support the view that lenders differ in their ability to screen and monitor borrowers and that their ability is persistent. We also find evidence that lenders’ participation in the M&A market can resolve uncertainty about M&A deal quality, improve corporate governance by preventing value-destroying M&As, and provide long-term monitoring benefits to acquirer shareholders.

Suggested Citation

  • Massoud, Nadia & Song, Keke & Tran, Nam, 2024. "Lender effects on gains from mergers and acquisitions," Journal of Banking & Finance, Elsevier, vol. 163(C).
    • Handle: RePEc:eee:jbfina:v:163:y:2024:i:c:s0378426624000888
    DOI: 10.1016/j.jbankfin.2024.107171
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    More about this item

    Keywords

    M&As; Loan financing; Corporate governance; Lending relationship; Uncertainty resolution; Lender ability; Textual analysis;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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