Does leverage influence acquisition performance? An analysis of financial systems and leverage levels
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2023-07-07
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en
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This thesis quantitatively examines the relationship between leverage and acquisition performance in different financial systems and for different leverage levels. Leverage is divided into acquirer leverage, target leverage, and additional leverage. Acquisition performance is measured by Cumulative Abnormal Returns (CARs) of stocks for three different periods: the announcement period, the interim period, and the post-acquisition period. By splitting the leverage into three types, distinguishing between market-based and bank-based financial systems, and seeing whether the leverage levels influence the acquisition performance, three aspects of leverage are used to give insights into the relationship. The data contains 1,887 acquisitions in developed financial systems from 1998 until 2020. The main findings of this thesis are that the interim period is the most significant period for the effect of leverage on CARs and that it is important to communicate with shareholders. Additionally, this thesis finds that acquisitions in market-based countries tend to perform worse than acquisitions in bank-based countries. Conclusively, this thesis finds that no matter the leverage level of the acquirers, the CARs increase when they buy high-leverage firms. The outcomes of this thesis highlight the importance of communication to shareholders and suggest further research into the differences between the financial systems.
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Faculteit der Managementwetenschappen