Premium
The Effect Of International Acquisitions on Firm Leverage
Author(s) -
Chkir Imed,
Cosset JeanClaude
Publication year - 2003
Publication title -
journal of financial research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.319
H-Index - 49
eISSN - 1475-6803
pISSN - 0270-2592
DOI - 10.1111/1475-6803.00071
Subject(s) - leverage (statistics) , profitability index , diversification (marketing strategy) , debt , business , subsidiary , monetary economics , debt financing , capital structure , financial system , finance , multinational corporation , economics , marketing , computer science , machine learning
To determine whether corporate international diversification leads firms to increase their leverage, we perform an event study that compares the leverage of corporations before and after they acquire foreign subsidiaries. We find that on average leverage increases from the first to the third year following the acquisition. When we examine the relation between additional debt financing after foreign acquisitions and the characteristics of these acquisitions, we find that in addition to such major determinants as size and profitability, debt financing is explained by geographical and industrial diversification effects.