Mergers increase default risk

Journal of Corporate Finance

Volumn 17, Issue 4, 2011, Pages 832-849

  Furfine, Craig H ^a   Rosen, Richard J ^b  

^a NORTHWESTERN UNIVERSITY   (United States)

^b FEDERAL RESERVE BANK OF CHICAGO   (United States)

Author keywords

Asset diversification; Default risk; Mergers

Indexed keywords

EID: 79954579018     PISSN: 09291199     EISSN: None     Source Type: Journal    
DOI: 10.1016/j.jcorpfin.2011.03.003     Document Type: Article

References (52)

1. Acharya, Viral V., Amihud, Yakov, and Litov, Lubomir, forthcoming. "Creditor rights and corporate risk-taking," Journal of Financial Economics.
2. Altman I.Edward, Rijken A.Herbert How rating agencies achieve rating stability. J. Bank. Finance 2004, 28:2679-2714.
3. Amihud Yakov, Lev Baruch Risk reduction as managerial motive for conglomerate mergers. Bell J. Econ. 1981, 12:823-837.
4. Andrade Gregor, Mitchell Mark, Stafford Erik New evidence and perspectives on mergers. J. Econ. Perspect. 2001, 15:103-120.
5. Asquith Paul, Bruner Robert, Mullins David The gains to bidding firms from mergers. J. Financ. Econ. 1983, 11:121-139.
6. Asquith Paul, Bruner Robert, Mullins David Merger Returns and the Form of Financing 1987, working paper.
7. Banerjee Ajeyo, Owers James Wealth reduction in white knight bids. Financ. Manage. 1992, 21:48-57.
8. Berger Philip, Ofek Eli Diversification's effect on firm value. J. Financ. Econ. 1995, 37:39-65.
9. Bharath Sreedhar T., Shumway Tyler Forecasting default with the Merton distance to default model. Rev. Financ. Stud. 2008, 21:1339-1369.
10. Billett Matthew T., King Tao-Hsien Dolly, Mauer David C. Bondholder wealth effects in mergers and acquisitions: new evidence from the 1980s and 1990s. J. Finance 2004, 49:107-135.
11. Bliss Richard, Rosen Richard J. CEO compensation and bank mergers. J. Financ. Econ. 2001, 61:107-138.
12. Bradley Michael, Desai Anand, Kim E.Han Synergistic gains from corporate acquisitions and their division between the stockholders of target and acquiring firms. J. Financ. Econ. 1988, 21:3-40.
13. Byrd John, Hickman Kent Do outside directors monitor managers? Evidence from tender offer bids. J. Financ. Econ. 1992, 32:195-221.
14. Cai Jie, Vijh Anand M. Incentive effects of stock and option holdings of target and acquirer CEOs. J. Finance 2007, 62:1891-1933.
15. Dierkens Nathalie Information asymmetry and equity issues. J. Financ. Quant. Anal. 1991, 26:181-200.
16. Dong Ming, Hirshleifer David, Richardson Scott, Teoh Siew Hong Does investor misvaluation drive the takeover market?. J. Finance 2006, 61:725-762.
17. Dwyer Douglas, Qu Shisheng EDF 8.0 Model Enhancements: Modeling Methodology 2007, Moody's KMV Company.
18. Ghosh Aloke, Jain Prem C. Financial leverage changes associated with corporate mergers. J. Corp. Finance 2000, 6:377-402.
19. Gilson Ronald J., Black S.Bernard The Law and Finance of Corporate Acquisitions 1995, The Foundation Press, Westbury, New York. 2nd edition.
20. Grinstein Yaniv, Hribar Paul CEO compensation and incentives: evidence from M&A bonuses. J. Financ. Econ. 2004, 73:119-143.
21. Harford Jarrad, Li Kai Decoupling CEO wealth and firm performance: the case of acquiring CEOs. J. Finance 2007, 62:917-949.
22. Hoberg Gerard, Phillips Gordon Product market synergies and competition in mergers and acquisitions: a text-based analysis. Rev. Financ. Stud. 2010, 23(10):3773-3811.
23. Jennings Robert, Mazzeo Michael Stock price movements around acquisition announcements and management's response. J. Bus. 1991, 64:139-163.
24. Jovanovic Boyan, Rousseau Peter L. The Q-theory of mergers. Am. Econ. Rev. 2002, 92:198-204.
25. Kedia Simi, Zhou Xing Informed trading around acquisitions: evidence from corporate bonds Available at SSRN. http://ssrn.com/abstract=1337803.
26. Kim E.Han, McConnell John Corporate mergers and the co-insurance of corporate debt. J. Finance 1977, 32:349-365.
27. Korablev, Irina and Qu, Shisheng, 2009. "Validating the public EDF model performance during the credit crisis," mimeo, MoodysKMV.
28. Lang Larry, Stulz Rene Tobin's q, corporate diversification, and firm performance. J. Polit. Econ. 1994, 102:1248-1280.
29. Leland Hayne E. Financial synergies and the optimal scope of the firm, implications for mergers, spinoffs, and structured finance. J. Finance 2007, 62:765-807.
30. Lewellen Wilbur G. A pure financial rationale for the conglomerate merger. J. Finance 1971, 26:521-537.
31. Maksimovic, Vojislav, Phillips, Gordon, and Prabhala, N.R., forthcoming. "Post-merger restructuring and the boundaries of the firm," Journal of Financial Economics.
32. Maquieira Carlos P., Megginson William L., Nail Lance Wealth creation versus wealth redistributions in pure stock-for-stock mergers. J. Financ. Econ. 1997, 48:3-33.
33. Masulis Ronald W., Wang Cong, Xie Fei Corporate governance and acquirer returns. J. Finance 2007, 62:1851-1889.
34. Merton Robert C. On the pricing of corporate debt: the risk structure of interest rates. J. Finance 1974, 29:449-470.
35. Mitchell Mark, Pulvino Todd Characteristics of risk and return in risk arbitrage. J. Finance 2001, 56:2135-2175.
36. Mitchell Mark, Pulvino Todd, Stafford Erik Price pressure around mergers. J. Finance 2004, 59:31-63.
37. Moeller Sara B., Schlingemann Frederik P., Stulz Rene M. Firm size and the gains from acquisitions?. J. Financ. Econ. 2004, 73:201-228.
38. Moeller Sara B., Schlingemann Frederik P., Stulz Rene M. Wealth destruction on a massive scale? A study of acquiring-firm returns in the recent merger wave. J. Finance 2005, 60:757-782.
39. Moeller Sara B., Schlingemann Frederik P., Stulz Rene M. How do diversity of opinion and information asymmetry affect acquirer returns?. Rev. Financ. Stud. 2007, 20:2047-2078.
40. Moody's Investors Service "Corporate Default and Recovery Rates," 1920-2006 2007, Special Comment.
41. Morellec Erwan, Zhdanov Alexei Financing and takeovers. J. Financ. Econ. 2008, 87:556-581.
42. Myers Stewart C., Majluf Nicholas S. Corporate financing and investment decisions when firms have information that investors do not. J. Financ. Econ. 1984, 13:187-221.
43. Panousi Vasia, Papanikolaou Dimitris Investment, Idiosyncratic Risk, and Ownership 2008, working paper.
44. Rau P.Raghavendra, Vermaelen Theo Glamour, value and the post-acquisition performance of acquiring firms. J. Financ. Econ. 1998, 49:223-253.
45. Rhodes-Kropf Matthew, Robinson David T., Viswanathan S. Valuation waves and merger activity, the empirical evidence. J. Financ. Econ. 2005, 77:561-603.
46. Roll Richard The hubris hypothesis of corporate takeovers. J. Bus. 1986, 59:197-216.
47. Servaes Henri Tobin's Q and the gains from takeovers. J. Finance 1991, 46:409-419.
48. Shleifer Andrei, Vishny Robert W. Stock market driven acquisitions. J. Financ. Econ. 2003, 70:295-311.
49. Travlos Nicolas G. Corporate takeover bids, method of payment, and bidding firms' stock returns. J. Finance 1987, 42:943-963.
50. Uysal Vahap B. Deviation from the Target Capital Structure and Acquisition Choices 2007, working paper.
51. Varaiya Nikhil, Ferris Kenneth Overpaying in corporate takeovers, the winner's curse. Financ. Analysts' J. 1987, 64-70.
52. You Victor, Caves Richard, Smith Michael, Henry James Mergers and bidders' wealth, managerial and strategic factors. The Economics of Strategic Planning. Essays in Honor of Joel Dean, Lexington Books 1986, 201-221. L.G. Thomas (Ed.).