Publication type
Journal article with impact factorPublication Year
2016Journal
Journal of Business Finance and AccountingPublication Volume
43Publication Issue
9/10Publication Begin page
1297Publication End page
1324
Metadata
Show full item recordAbstract
Existing research shows that bidder default risk increases following acquisitions due to a rise in post-acquisition leverage and managerial risk-taking actions offsetting the potential for asset diversification. This study examines whether the risk effects of acquiring distressed targets are fundamentally different and investigates possible explanations for any dissimilarities. Bidders often acquire relatively smaller distressed targets in domestic and related industries and have a higher initial target stake and more financial flexibility, thereby minimizing risk exposure. Controlling for several characteristics of bidder investment behaviour in both types of deals, however, we find that the increase in bidder default risk is substantially larger when acquiring distressed firms.Keyword
Mergers and Acquisitions, Distress, Default Risk, Volatility, Risk Factors, Financial Distress, Corporate Governance, Debt CapacityKnowledge Domain/Industry
Accounting & Financeae974a485f413a2113503eed53cd6c53
10.1111/jbfa.12210