Capital Structure Gain from Mergers - Formulation and Estimation

Posted: 25 Aug 1998

See all articles by Joseph Yagil

Joseph Yagil

University of Haifa - Graduate School of Business

Abstract

This study focuses on financial (as distinct from operating or managerial) effects of mergers. It presents a formal expression for a capital-structure gain from mergers when there exist both corporate and personal taxes as well as bankruptcy costs. To test the hypothesis that financial effects are more important for unrelated (than for related) businesses, we estimate the capital structure gain for two types of mergers: pure conglomerate (PC) mergers and non-conglomerate (NC) vertical and horizontal mergers. The empirical findings suggest that the financial dollar gain for PC mergers is as much as twice higher than the financial gain for NC mergers. The results also indicate that the mean financial gain comprises about one-half of the mean total gain from PC mergers. These findings seem consistent with the existence of financial effects of mergers reported in the literature.

JEL Classification: G34

Suggested Citation

Yagil, Yosef, Capital Structure Gain from Mergers - Formulation and Estimation. Available at SSRN: https://ssrn.com/abstract=6623

Yosef Yagil (Contact Author)

University of Haifa - Graduate School of Business ( email )

Haifa 31905
Israel
972-4-240085 (Phone)
972-4-240059 (Fax)

Register to save articles to
your library

Register

Paper statistics

Abstract Views
1,293
PlumX Metrics