Acquisition probability, financing, duration, and stock return: the role of leverage deviation in Malaysia

• المؤلف الرئيسي: Al-Sabri, Haithm Mohammed Hamood
• التنسيق: أطروحة
• اللغة: الإنجليزية; الإنجليزية; الإنجليزية
• منشور في: 2021
• الموضوعات: HG Finance
• الوصول للمادة أونلاين: https://etd.uum.edu.my/10419/1/depositpermission-not%20allow_s901934.pdf; https://etd.uum.edu.my/10419/2/s901934_01.pdf; https://etd.uum.edu.my/10419/3/s901934_02.pdf

This study investigates the impact of leverage deviation in pre-acquisition year on acquisition decision, financing, duration, and stock returns based on empirical evidence from merger and acquisitions (M&As) by Malaysian non-financial listed firms during the period 2001-2018. The different impacts between overleveraged and underleveraged firms are also examined using probit model, multinomial logit, quantile regression model, and OLS regression. Besides the previous evidence from the developed markets, Malaysian firms are also considering the leverage deviation factor for their acquisitions plan. Findings from this study show that, there is an interdependence between pre-acquisition leverage deviation and acquisitions behaviours by Malaysian firms. Specifically, leverage deviation affects the acquisition probability negatively where underleveraged firm shows higher likelihood to engage in M&A activities. Thus, it proves that both trade-off theory and pecking order theory are relevant to acquisition financing which suggest that overleveraged acquirers tend to use stock financing to reduce their leverage deviation while underleveraged acquirers prefer to use internal funds over external sources. Moreover, leverage deviation also significantly affects acquisition duration where overleveraged (underleveraged) acquirers take longer (shorter) duration to complete their transactions. Finally, leverage deviation also affects the acquisition abnormal stock return positively. The findings from this study provide insights to managers and investors regarding the impact of targeting behaviours on corporate takeover decisions and outcomes. Leverage deviation in the pre-acquisition year can be an indicator for acquisition likelihood, financing options, acquisition duration, and acquisition stock return. Also, acquisitions by overleveraged firms are more related to synergy and targeting rather than agency motives. Furthermore, this study is expected to be useful to policymakers to enhance M&A activities in the market by facilitating flexible financing options for financial constrained firms and improve regulations to ensure a minimum level of efficiency for the negotiation of acquisitions.