Speed of adjustment toward capital structure in cross border and cross industry mergers and acquisitions

Abstract

Purpose - In this study, the speed of adjustment (SOA) toward target capital structure is investigated in cross border and cross industry mergers and acquisitions (M&A). Methodology - As a measure of capital structure both book leverage (BLEV) and market leverage (MLEV) ratios are used in the analysis. The sample consists of 6,520 M&A deals for the period of 2000-2016. Findings - The findings show that for both the BLEV and MLEV, the cross border M&A deals move faster toward the target capital structure compared to non-cross border M&A deals. While the SOA rate for the same and cross industry M&A cases does not show too much difference for BLEV and MLEV. Conclusion - Overall the firms adjust to their target capital structure in maximum three years following the M&A