Financing and takeovers

• 成果类型: Article
• 署名作者: Morellec, Erwan; Zhdanov, Alexel
• 署名单位: University of Lausanne; George Mason University; Swiss Finance Institute (SFI)
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2007.01.006
• 发表日期: 2008
• 页码: 556-581
• 关键词: Takeovers; option games; Real options; capital structure

摘要

This paper analyzes the interaction between financial leverage and takeover activity. We develop a dynamic model of takeovers in which the financing strategies of bidding firms and the timing and terms of takeovers are jointly determined. In the paper, capital structure plays the role of a commitment device, and determines the outcome of the acquisition contest. We demonstrate that there exists an asymmetric equilibrium in financing policies with endogenous leverage, bankruptcy, and takeover terms, in which the bidder with the lowest leverage wins the takeover contest. Based on the resulting equilibrium, the model generates a number of new predictions. In particular, the model predicts that the leverage of the winning bidder is below the industry average and that acquirers should lever up after the takeover consummation. The model also relates the dispersion in leverage ratios to various industry characteristics, such as cash flow volatility or bankruptcy costs. (C) 2008 Published by Elsevier B.V.