Financial constraints and synergy gains from mergers and acquisitions

Yang Duan, Yong Jin*

*Corresponding author for this work

    Research output: Contribution to journalJournal articlepeer-review

    9 Citations (Scopus)


    This paper examines mergers and acquisitions motivated by financial constraints. Synergy gain is measured as the cumulative abnormal return of a value-weighted portfolio of the acquirer and the target around the acquisition announcement. By constructing a financial constraint difference between the target and the acquirer, we find a positive relationship between the financial constraint difference and synergy gains generated from the acquisition. The positive effect of the financial constraint difference is only significant for high growth targets and severely constrained targets. The acquirer's corporate governance also enhances the synergy gains created from the financial constraint difference. Additional evidence shows that both acquirer's and target's shareholders benefit from the financial constraint difference. Our results are robust for different measures of financial constraint.

    Original languageEnglish
    Pages (from-to)60-82
    Number of pages23
    JournalJournal of International Financial Management and Accounting
    Issue number1
    Publication statusPublished - 1 Feb 2019

    Scopus Subject Areas

    • Accounting
    • Business, Management and Accounting (miscellaneous)
    • Finance

    User-Defined Keywords

    • acquisitions
    • financial constraint
    • mergers
    • synergy gains


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