The Relationship between Announcements of Complete Mergers and Acquisitions and Acquirers' Abnormal CDS Spread Changes

56 Pages Posted: 9 Apr 2021

See all articles by Benjamin Hippert

Benjamin Hippert

BaFin- Federal Financial Supervisory Authority

André Uhde

University of Paderborn - Faculty of Business Administration and Economics - Department of Taxation, Accounting & Finance

Date Written: April 8, 2021

Abstract

Employing a sample of 492 merger and acquisition (M&A) announcements from 284 acquirers across North America and Europe between 2005 and 2018, this study analyzes the impact of M&A announcements on an acquirers abnormal CDS spread changes. We find that spreads from CDS which are written on acquirers increase by 310 bps during a symmetric five-day event window suggesting that investors expect an increase in the acquirers credit risk exposure due to M&As. Next to this baseline finding, we conduct a large variety of sensitivity analyses to gain more insight into the driving factors of the rising risk perception of CDS investors due to M&A announcements.

Keywords: credit default swaps, risk perception of CDS investors, mergers and acquisitions, event study

JEL Classification: G14, G34

Suggested Citation

Hippert, Benjamin and Uhde, André, The Relationship between Announcements of Complete Mergers and Acquisitions and Acquirers' Abnormal CDS Spread Changes (April 8, 2021). Available at SSRN: https://ssrn.com/abstract=3822523 or http://dx.doi.org/10.2139/ssrn.3822523

Benjamin Hippert

BaFin- Federal Financial Supervisory Authority ( email )

Graurheindorfer Str. 108
Bonn, 53117
Germany

André Uhde (Contact Author)

University of Paderborn - Faculty of Business Administration and Economics - Department of Taxation, Accounting & Finance ( email )

Warburger Str. 100
D-33098 Paderborn
Germany

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
13
Abstract Views
162
PlumX Metrics