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The Value of Access to Finance: Evidence from M&A

56 Pages Posted: 2 Nov 2014 Last revised: 14 Jul 2017

Jess Cornaggia

Pennsylvania State University - Department of Finance

Jay Y. Li

City University of Hong Kong

Date Written: June 14, 2017

Abstract

We examine synergies in mergers and acquisitions generated by firms’ comparative advantages in access to bank finance. We find robust evidence that greater access to bank finance increases firms’ attractiveness as acquisition targets. Targets’ comparative advantage in bank finance improves bank credit supply and reduces financing costs for the merged firms. These effects are more pronounced for acquirers with greater frictions in accessing bank loans and acquirers with greater growth opportunities. Overall, this paper reveals that targets, not just acquirers, contribute to financial synergies in M&A.

Keywords: M&A, Access to finance, Financing synergy, Banking deregulation

JEL Classification: G21, G32, G34

Suggested Citation

Cornaggia, Jess and Li, Jay Y., The Value of Access to Finance: Evidence from M&A (June 14, 2017). Available at SSRN: https://ssrn.com/abstract=2517800 or http://dx.doi.org/10.2139/ssrn.2517800

Jess Cornaggia

Pennsylvania State University - Department of Finance ( email )

University Park, PA 16802
United States

HOME PAGE: http://jesscornaggia.com

Jay Li (Contact Author)

City University of Hong Kong ( email )

Department of Economics and Finance
83 Tat Chee Avenue, Kowloon
Hong Kong
Hong Kong
+852 3442 7978 (Phone)

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