Titre
Financing and Takeovers
Type
article
Institution
UNIL/CHUV/Unisanté + institutions partenaires
Périodique
Auteur(s)
Morellec, E.
Auteure/Auteur
Zhdanov, A.
Auteure/Auteur
Liens vers les personnes
Liens vers les unités
Statut éditorial
Publié
Date de publication
2008-03
Volume
87
Numéro
3
Première page
556
Dernière page/numéro d’article
581
Peer-reviewed
Oui
Langue
anglais
Résumé
This paper analyzes the interaction between financial leverage and takeover activity. We develop a dynamic model of takeovers in which the financing strategies of bidding firms and the timing and terms of takeovers are jointly determined. In the paper, capital structure plays the role of a commitment device, and determines the outcome of the acquisition contest. We demonstrate that there exists an asymmetric equilibrium in financing policies with endogenous leverage, bankruptcy, and takeover terms, in which the bidder with the lowest leverage wins the takeover contest. Based on the resulting equilibrium, the model generates a number of new predictions. In particular, the model predicts that the leverage of the winning bidder is below the industry average and that acquirers should lever up after the takeover consummation. The model also relates the dispersion in leverage ratios to various industry characteristics, such as cash flow volatility or bankruptcy costs.
PID Serval
serval:BIB_378B8ECAE4A6
Date de création
2010-11-12T11:00:11.202Z
Date de création dans IRIS
2025-05-20T19:50:48Z