Bond market access and acquisitions: empirical evidence from the European market

We investigate whether access to bond markets affects acquisition activity of the European firms between 1999 and 2014. Our study provides insight into the effect that the growing European bond market has on corporate investment activity. We find that access to the bond markets, measured by the exis...

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Bibliographic Details
Published in:The European journal of finance 2018-04, Vol.24 (6), p.478-498
Main Authors: Blomkvist, Magnus, Friman, Teemu, Korkeamäki, Timo
Format: Article
Language:English
Subjects:
Access
Acquisition
acquisitions
Acquisitions & mergers
Bond markets
Companies
corporate governance
Credit ratings
Economics and Finance
Humanities and Social Sciences
mergers
restructuring
Studies
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Summary:We investigate whether access to bond markets affects acquisition activity of the European firms between 1999 and 2014. Our study provides insight into the effect that the growing European bond market has on corporate investment activity. We find that access to the bond markets, measured by the existence of a credit rating, has a significant effect on the tendency of firms to make acquisitions. The effect is strongest in Continental Europe and during times of high acquisition activity. We further find that consistent with prior U.S. evidence, bond market access has an inverse effect on abnormal returns generated by the acquisitions. That finding suggests that firms with superior access to financing pursue targets of lesser quality.
ISSN:1351-847X
1466-4364
DOI:10.1080/1351847X.2017.1323771