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Leverage deviations and acquisition probability in the UK: The moderating effect of firms’ internal capabilities and deal diversification potential

Leverage deviations and acquisition probability in the UK: The moderating effect of firms’ internal capabilities and deal diversification potential
Leverage deviations and acquisition probability in the UK: The moderating effect of firms’ internal capabilities and deal diversification potential
In the context of mergers and acquisitions, we provide evidence to suggest that a firm's deviation from its optimal financial leverage may impede its ability to undertake future expansions. We also find the negative effect of leverage deviation on acquisition probability to be moderated by firms’ existing capabilities. Further, we find those deviating firms to have better prospects of achieving growth when they pursue cross‐industry and/or cross‐country mergers and acquisitions. Overall, our findings imply that deviations from the optimal financial leverage may be costly to firms but this cost is not symmetric across all firms and all deal types.
1740-4762
Agyei-Boapeah, Henry
37005f29-d453-458e-b6b5-cd92e55587a4
Osei, Deborah
cecd648c-3a39-4678-8091-0488edd54a29
Franco, Michael
1820e5dc-adcb-4e6e-94c4-c387fb4ac05a
Agyei-Boapeah, Henry
37005f29-d453-458e-b6b5-cd92e55587a4
Osei, Deborah
cecd648c-3a39-4678-8091-0488edd54a29
Franco, Michael
1820e5dc-adcb-4e6e-94c4-c387fb4ac05a

Agyei-Boapeah, Henry, Osei, Deborah and Franco, Michael (2018) Leverage deviations and acquisition probability in the UK: The moderating effect of firms’ internal capabilities and deal diversification potential. European Management Review. (doi:10.1111/emre.12307).

Record type: Article

Abstract

In the context of mergers and acquisitions, we provide evidence to suggest that a firm's deviation from its optimal financial leverage may impede its ability to undertake future expansions. We also find the negative effect of leverage deviation on acquisition probability to be moderated by firms’ existing capabilities. Further, we find those deviating firms to have better prospects of achieving growth when they pursue cross‐industry and/or cross‐country mergers and acquisitions. Overall, our findings imply that deviations from the optimal financial leverage may be costly to firms but this cost is not symmetric across all firms and all deal types.

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Leverage Deviations and Acquisition Probability in the UK - Accepted Manuscript
Restricted to Repository staff only until 4 July 2020.
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More information

Accepted/In Press date: 15 May 2018
e-pub ahead of print date: 5 July 2018

Identifiers

Local EPrints ID: 434313
URI: https://eprints.soton.ac.uk/id/eprint/434313
ISSN: 1740-4762
PURE UUID: 613c5872-62b1-4547-bca9-738818fa22e6
ORCID for Henry Agyei-Boapeah: ORCID iD orcid.org/0000-0003-4798-6324

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Date deposited: 19 Sep 2019 16:30
Last modified: 03 Dec 2019 01:20

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Contributors

Author: Deborah Osei
Author: Michael Franco

University divisions

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