Default Risk Level Changes in Cross-Border Mergers and Acquisitions: Indian Scenario

##plugins.themes.academic_pro.article.sidebar##

Published Dec 1, 2017
Download
PDF
Statistic

Downloads

Download data is not yet available.

Metrics

Metrics Loading ...
Volume 7, Issue 2, December 2017

##plugins.themes.academic_pro.article.main##

Arun T. C.
Research Scholar, Department of Management, Pondicherry University, Karaikal
Akhila T. V.
Research Scholar, Department of Management, Pondicherry University, Karaikal
M. Dharmalingam
Associate Professor, Department of Management, Pondicherry University, Karaikal

Abstract

With cross-border mergers and acquisitions (M&As) data we observe the role institutional, managerial and geographic factors on the default risk of acquiring companies after the merger. Using Distance to Default model the study analysing the default risk level of acquiring firm after mergers and acqusitions. The study reveals that M&A plays an important role in firms default risk. The acquiring firm is getting the advantage of overvaluation and stock price volatility. Geographic factors and industrial diversification also have a significant effect on post-merger default risk. From the study, it is clear that the corporates can manage their risk through cross- border mergers and acquisitions

##plugins.themes.academic_pro.article.details##

How to Cite
T. C., A., T. V., A., & Dharmalingam, M. (2017). Default Risk Level Changes in Cross-Border Mergers and Acquisitions: Indian Scenario. SJCC Management Research Review, 103–111. Retrieved from http://www.sjccmrr.res.in/index.php/sjcc/article/view/15

References

  1. Dos Santos, M. B., Errunza, V. R., & Miller, D. P. (2008). Does corporate international diversification destroy value? Evidence from cross-border mergers and acquisitions. Journal of Banking & Finance, 32(12), 2716-2724.
  2. Amiuhud, Y., & Lev, B. (1981). Risk reduction as a managerial motive for conglomerate mergers. The bell journal of economics, 605-617.
  3. Bharath, S. T., & Shumway, T. (2008). Forecasting default with the Merton distance to default model. Review of Financial Studies, 21(3), 1339-1369.
  4. Bris, A., & Cabolis, C. (2008). The value of investor protection: Firm evidence from cross-border mergers. Review of Financial Studies, 21(2), 605-648.
  5. Cai, J., & Vijyh, A. M. (2007). Incentive effects of stock and option holdings of target and acquirer CEOs. The Journal of Finance, 62(4), 1891-1933.
  6. Dong, M., Hirshleifer, D., Richardson, S., & Teoh, S. H. (2006). Does investor misvaluation drive the takeover market?. The Journal of Finance, 61(2), 725-762.
  7. Emmons, W. R., Gilbert, R. A., & Yeager, T. J. (2004). Reducing the risk at small community banks: 1s it size or geographic diversification that matters?. Journal of Financial Services Research, 25(2-3), 259-281.
  8. Furfine, C. H., & Rosen, R. J. (2011). Mergers increase default risk. Journal of Corporate Finance, 17(4), 832-849.
  9. Galai, D., &Masulis, R. W. (1976). The option pricing model and the risk factor of stock. Journal of Financial economics, 3(1), 53-81.
  10. Ghosh, A., & Jain, P. C. (2000). Financial leverage changes associated with corporate mergers. Journal of Corporate Finance, 6(4), 377-402.
  11. Harford, J., & Li, K. (2007). Decoupling CEO wealth and firm performance: The case of acquiring CEOs. The Journal of Finance, 62(2), 917-949.
  12. Hughes, J. P., Lang, W. W., Mester, L. J., & Moon, C. G. (1999). The dollars and sense of bank consolidation. Journal of banking & finance, 23(2), 291-324.
  13. Koerniadi, H., Krishnamurti, C., & Tourani-Rad, A. (2015). Cross-border mergers and acquisitions and default risk. International Review of Financial Analysis, 42, 336-348.
  14. Moeller, R. R. (2007). COSO enterprise risk management: understanding the new integrated ERM framework. John Wiley & Sons.
  15. Moeller, S. B., Schlingemann, F. P., &Stulz, R. M. (2007). How dodiversity of opinion and information asymmetry affect acquirer returns?. Review of Financial Studies, 20(6), 2047-2078.
  16. Morellec, E., & Zhdanov, A. (2008). Financing and takeovers. Journal of Financial Economics, 87(3), 556-581.
  17. Uysal, V. B., Kedia, S., & Panchapagesan, V. (2008). Geography and acquirer returns. Journal of Financial Intermediation, 17(2), 256-275.
  18. Vallascas, F., & Hagendorff, J. (2011). The impact of European bank mergers on bidder default risk. Journal of Banking & Finance, 35(4), 902-915.