Abstract
This paper examines the role of foreign versus domestic ownership in reducing the debt levels of acquired firms in Italy and Spain over the period 2002-2010. Acknowledging that lower debt levels can mitigate the risk of failure and thus enhance the chances for a positive post-acquisition performance and survival, we particularly examine the causal effect of foreign and domestic acquisitions on two firm-level debt measures: gearing and short-term leverage. To estimate causal relationships, we control for selection bias by applying propensity score matching techniques. Our results indicate that foreign acquisition leads to a significant and steady reduction in the debt ratios of the target companies. In contrast, the relationship between domestic acquisition and debt reduction appears to be smaller and statistically less robust.
Original language | English |
---|---|
Journal | International Business Review |
Early online date | 9 Feb 2017 |
DOIs | |
Publication status | E-pub ahead of print - 9 Feb 2017 |
Keywords
- acquisitions
- foreign investment
- debt ratios
- capital structure