Speed of adjustment toward capital structure in cross border and cross industry mergers and acquisitions

Irfan U. Shah, M. Banu Durukan
2019 Pressacademia  
Purpose -In this study, the speed of adjustment (SOA) toward target capital structure is investigated in cross border and cross industry mergers and acquisitions (M&A). Methodology -As a measure of capital structure both book leverage (BLEV) and market leverage (MLEV) ratios are used in the analysis. The sample consists of 6,520 M&A deals for the period of 2000-2016. Findings -The findings show that for both the BLEV and MLEV, the cross border M&A deals move faster toward the target capital
more » ... target capital structure compared to non-cross border M&A deals. While the SOA rate for the same and cross industry M&A cases does not show too much difference for BLEV and MLEV. Conclusion -Overall the firms adjust to their target capital structure in maximum three years following the M&A Keywords: Speed of adjustment, cross border M&A, cross industry M&A, target capital structure, merger and acquisition. JEL Codes: G34, G30, F65, D53 According to the related literature, two different scenarios are observed while considering the adjustment of capital structure and M&A activities. The first is that M&A decisions are made solely for financial motives and the intention of managers is to adjust to target capital structure (Leland 2007; Lewellen, 1971; Scott, 1977; Gugler and Konrad, 2002) . While in the second scenario, nonfinancial motives such as; market share growth, operational synergies, economies of scales are the motives behind the M&A decisions (
doi:10.17261/pressacademia.2019.1014 fatcat:oco4hhvfxvfxno7z5gpl6ftsau