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Credit supply, post-acquisition performance and financial constraints

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  • Magnus Blomkvist
  • Karl Felixson

Abstract

We study the effect of credit supply on the acquisition behaviour of financially constrained (FC) and financially unconstrained (UC) firms. FC firms are likely to conduct acquisitions when credit supply is greater while UC firms can conduct acquisitions whenever a good opportunity arises. We argue that the flexibility unconstrained firms have is valuable. Our empirical results indicate that UC firms outperform FC firms up to 36 months after the acquisition. We also find that increased credit supply increases the probability of conducting mergers and acquisitions (M&As) for FC firms while it has less impact on M&A behaviour of UC firms.

Suggested Citation

  • Magnus Blomkvist & Karl Felixson, 2018. "Credit supply, post-acquisition performance and financial constraints," Applied Economics Letters, Taylor & Francis Journals, vol. 25(20), pages 1421-1425, November.
    • Handle: RePEc:taf:apeclt:v:25:y:2018:i:20:p:1421-1425
    DOI: 10.1080/13504851.2017.1422598
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