Work

Corporate mergers and acquisitions under lender scrutiny

Year: 2025

Type: article

Abstract: This paper examines corporate mergers and acquisitions (M&A) outcomes under lender scrutiny. Using the unique shocks of U.S. supervisory stress testing, we find that firms under increased lender scrutiny after their relationship banks fail stress tests engage in fewer but higher-quality M&A deals. Evidence from comprehensive supervisory data reveals improved credit quality for newly originated M&A-related loans under enhanced lender scrutiny. This improvement is further evident in positive stock return reactions to M&A deals financed by loans subject to enhanced lender scrutiny. As companies engage in fewer but higher-quality deals, they also experience higher returns on assets. Our findings highlight the importance of lender scrutiny in corporate M&A activities.

Source: Journal of Corporate Finance

DOI: 10.1016/j.jcorpfin.2025.102812

Authors: Buhui Qiu, Teng Wang

Institutions: The University of Sydney, Federal Reserve Board of Governors, Bank for International Settlements

Language: English

Topic: Corporate Finance and Governance

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

Open Access status: hybrid

Estimated APC paid: $4,140

Funder: Australian Research Council