Business, Management and Accounting
4 years ago

Increased leverage post-takeover leads to negative corporate performance, but bank debt helps.

Journal of Corporate Finance
Debt, debt structure and corporate performance after unsuccessful takeovers: evidence from targets that remain independent
Tomas Jandik, Anil K. Makhija

Paper Summary

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Increased leverage in companies after failed takeovers can either signal commitment to improvement or entrenchment of management. The type of debt used also plays a role, with bank debt potentially reducing negative effects of increased leverage. Overall, corporate performance is negatively related to leverage, but bank debt can offset this effect.