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The disciplinary role of leverage: evidence from East Asian cross-border acquirers’ returns

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  • Durand, Robert B.
  • Laing, Elaine
  • Thao Ngo, Minh

Abstract

We present evidence of an important disciplinary role for leverage in East Asian firms prior to making foreign acquisitions: as firms surpass an optimal leverage level, their excess leverage levels expose shareholders to agency costs which outweigh any benefits from the M&As. We find the disciplinary effect of leverage is present in both common and code law countries.

Suggested Citation

  • Durand, Robert B. & Laing, Elaine & Thao Ngo, Minh, 2016. "The disciplinary role of leverage: evidence from East Asian cross-border acquirers’ returns," Finance Research Letters, Elsevier, vol. 18(C), pages 83-88.
    • Handle: RePEc:eee:finlet:v:18:y:2016:i:c:p:83-88
    DOI: 10.1016/j.frl.2016.04.004
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    2. Sherif, Mohamed, 2020. "The impact of Coronavirus (COVID-19) outbreak on faith-based investments: An original analysis," Journal of Behavioral and Experimental Finance, Elsevier, vol. 28(C).

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    More about this item

    Keywords

    Debt; Mergers; Acquisitions; Cross-border;
    All these keywords.

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance

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