Cross-border acquisitions and financial leverage of UK acquirers

• Cross-border acquisitions negatively impact the financial leverage of acquirers.
• The cross-border effect is restricted to acquirers with targets from developing nations.
• The cross-border effect is restricted to acquirers with no prior experience in foreign markets.

Based on a sample of 782 acquisitions by UK firms during 1982–2009, this paper examines the impact of cross-border acquisitions on financial leverage. The paper shows that cross-border acquisitions have a negative impact on the financial leverage of acquiring firms. However, the negative impact of cross-border acquisitions disappears when acquirers choose targets from developed countries, and also when the acquisitions are undertaken by multinational firms. Collectively, the findings imply that exposure to foreign markets reduces the borrowing ability of acquiring firms especially when they choose targets from developing countries, and when they have no previous experience in foreign markets.