Lender Effects on Gains from Mergers and Acquisitions

59 Pages Posted: 30 Oct 2019

See all articles by Nadia Massoud

Nadia Massoud

Melbourne Business School, University of Melbourne

Keke Song

Melbourne Business School, the University of Melbourne

Nam Tran

University of Melbourne - Melbourne Business School

Date Written: October 10, 2019

Abstract

This paper employs a new approach to identify merger and acquisition (M&A) transactions financed by syndicated loans and provides evidence that acquirer announcement returns are higher in loan-financed M&A deals than in other deals. Utilizing an instrumental variable approach and a quasi-natural experiment, we provide evidence that lenders contribute to the higher acquirer announcement returns in loan-financed M&A deals. Lenders’ performance in M&A financing is persistent over time. Lenders’ participation in the M&A market can resolve uncertainty about the M&A deal quality, improve corporate governance by preventing value-destroying M&A transactions, and provide long-term monitoring benefits to acquirer shareholders.

Keywords: M&As, syndicated loan, corporate governance, lending relationship, uncertainty resolution, lender ability, FAS 166/167

JEL Classification: G14, G34, G21, D82

Suggested Citation

Massoud, Nadia and Song, Keke and Tran, Nam, Lender Effects on Gains from Mergers and Acquisitions (October 10, 2019). Available at SSRN: https://ssrn.com/abstract=3472771

Nadia Massoud

Melbourne Business School, University of Melbourne ( email )

200 Leicester Street
Carlton, Victoria 3053 3186
Australia
+61 3 9349 8130 (Phone)
+61 3 9349 8136 (Fax)

HOME PAGE: http://mbs.edu/facultyresearch/facultydirectory/Pages/NadiaMassoud.aspx

Keke Song (Contact Author)

Melbourne Business School, the University of Melbourne ( email )

200 Leicester Steet
Carlton, 3053
Australia

Nam Tran

University of Melbourne - Melbourne Business School ( email )

200 Leicester Street
Carlton, Victoria 3053 3186
Australia

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