Corporate mergers and acquisitions: A strategic approach to mitigate expected default frequency

Abstract

This study investigates the influence of corporate mergers and acquisitions on debt default risk by analyzing a dataset of 14,990 A-share listed companies from 2010 to 2021. The results demonstrate that corporate mergers and acquisitions effectively mitigate expected default frequency, a conclusion that withstands a variety of robustness checks. Through mechanism testing, it's found that mergers and acquisitions alleviate corporate financing constraints and boost information transparency, subsequently lowering debt default risk. The heterogeneity analysis further reveals that this mitigating effect is particularly pronounced in younger companies, those with weaker internal governance, and companies situated in less marketized regions.