Lender Effects on Gains from Mergers and Acquisitions

62 Pages Posted: 6 Mar 2023

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

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Abstract

We employ textual analysis to identify mergers and acquisitions (M&As) financed by corporate loans and provide evidence that acquirer announcement returns are higher in loan-financed M&As. Utilizing an instrumental variable approach and difference-in-difference analysis, we confirm that lenders contribute to the higher acquirer returns in loan-financed M&As. Our findings support the view that lenders differ in their ability to screen and monitor borrowers and that their ability is persistent. We also find evidence that lenders’ participation in the M&A market can resolve uncertainty about M&A deal quality, improve corporate governance by preventing value-destroying M&As, and provide long-term monitoring benefits to acquirer shareholders.

Keywords: M&As, loan financing, Corporate Governance, lending relationship, uncertainty resolution, lender ability, Textual Analysis

Suggested Citation

Massoud, Nadia and Song, Keke and Tran, Nam, Lender Effects on Gains from Mergers and Acquisitions. Available at SSRN: https://ssrn.com/abstract=4379543 or http://dx.doi.org/10.2139/ssrn.4379543

Nadia Massoud

Melbourne Business School, University of Melbourne ( email )

200 Leicester Street
Carlton, Victoria 3053 3186
Australia
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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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