Credit Market Driven Acquisitions

75 Pages Posted: 15 Apr 2022 Last revised: 19 Sep 2022

See all articles by Huseyin Gulen

Huseyin Gulen

Purdue University - Krannert School of Management

Candace Jens

Syracuse University - Whitman School of Management

Stefano Rossi

Bocconi University; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Date Written: September 19, 2022


Using a comprehensive sample of takeovers over 1983-2016, we show that credit market conditions drive takeover activity. When credit spreads are low in quarter t, junk bonds are disproportionately issued and aggregate credit quality deteriorates; debt-financed, all-cash takeovers increase from quarter t+2, peak at quarter t+5, and subside as credit spreads widen. At the firm level, buoyant credit market conditions correlate with more debt-financed takeovers, particularly for overconfident CEOs, and also with higher announcement-day returns and operating performance, except for overconfident CEOs. Our results are consistent with buoyant credit market conditions ameliorating under-investment, but only for acquirers with non-overconfident CEOs.

Keywords: takeovers, mergers and acquisitions, credit quality, merger waves.

JEL Classification: G34, G32.

Suggested Citation

Gulen, Huseyin and Jens, Candace and Rossi, Stefano, Credit Market Driven Acquisitions (September 19, 2022). Available at SSRN: or

Huseyin Gulen

Purdue University - Krannert School of Management ( email )

1310 Krannert Building
West Lafayette, IN 47907-1310
United States

Candace Jens (Contact Author)

Syracuse University - Whitman School of Management ( email )

721 University Avenue
Syracuse, NY 13244-2130
United States

Stefano Rossi

Bocconi University ( email )

Via Roentgen 1
Milano, MI 20136

Centre for Economic Policy Research (CEPR) ( email )

United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels

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