English, Article, Journal or magazine article edition: Cash, access to credit, and value creation in M&As José Manuel Campa; Ignacio Hernando

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Bookmark: http://trove.nla.gov.au/version/33228
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Cash, access to credit, and value creation in M&​As
Author
  • José Manuel Campa
  • Ignacio Hernando
Physical Description
  • preprint
Notes
  • The worldwide availability of easy external financing has been an essential driver of recent M&​A activity and a growing perception exists that such conditions may have resulted in a large number of non-value increasing transactions. This paper evaluates the interaction between credit conditions, the method of payment and value creation in a sample of European M&​A transactions. The contribution of the paper is twofold. First, we analyze to what extent more generous financing conditions lead to deals that were less-likely to be value creating. Second, we estimate a joint model on the likelihood of choosing cash as a method of payment and the amount of value-created by such deals, controlling for the impact of financial conditions. We find that lower corporate bond spreads are correlated with less value creation in M&​A deals suggesting that easy financial conditions may have resulted in M&​A deals less-likely to generate value. We also find that higher leverage and a better cash-flow position of the target are more likely to result in cash deals and these deals provide higher excess returns to targets although do not generate value for the deal.
  • Mergers and acquisitions, payment method, credit conditions
  • RePEc:bde:wpaper:0915
Language
  • English
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