Why do over-deviated firms from target leverage undertake foreign acquisitions?
|dc.identifier.citation||Ahmed Y and Elshandidy T (2018) Why do over-deviated firms from target leverage undertake foreign acquisitions? International Business Review. 27(2): 309-327.||en_US|
|dc.description.abstract||This paper examines how deviation from firms’ target leverage influences their decisions on undertaking foreign acquisitions. Using a sample of 5,746 completed bids by UK acquirers from 1987 to 2012, we observe that over-deviated firms are more likely to acquire foreign targets. Consistent with co-insurance theory, we find that over-deviated firms engage in foreign acquisition deals to relieve their financial constraints and to mitigate their financial distress risk. We also note that foreign acquisitions enhance over-deviated firms’ value and performance, measured by Tobin’s q and return on assets (ROA) respectively. These findings support the view that over-deviated firms pursue the most value-enhancing acquisitions. Overall, this paper suggests that co-insurance effects, value creation and performance improvements are the main incentives for over-deviated firms’ involvement in foreign acquisitions.||en_US|
|dc.rights||© 2017 Elsevier. Reproduced in accordance with the publisher's self-archiving policy. This manuscript version is made available under the CC-BY-NC-ND 4.0 license (http://creativecommons.org/licenses/by-nc-nd/4.0/)||en_US|
|dc.subject||Leverage deviation; Co-insurance theory; Global diversification; Financial constraints; Default risk; Firm value; Operating performance||en_US|
|dc.title||Why do over-deviated firms from target leverage undertake foreign acquisitions?||en_US|