Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5102233 | The North American Journal of Economics and Finance | 2017 | 14 Pages |
Abstract
We provide new and consistent evidence supporting the trade-off theory using China's mergers and acquisitions (M&A) deals between 2000 and 2015 as a sample. We show that acquirers do have leverage targets and they adjust their leverage ratios toward an optimal level at which the cost and benefit of the debt are equal. In examining the leverage adjustment speed during the post-acquisition period, we find that acquirers partially adjust their leverage ratios to the optimal levels; and the adjustment speed is affected by the adjustment cost proxied by the bankruptcy risk. Finally, we are able to successfully replicate the US evidence which is consistent with the trade-off theory as well using our improved methodology.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Qizhi Tao, Wenjia Sun, Yingjun Zhu, Ting Zhang,