Financial risk and acquirers' stockholder wealth in mergers and acquisitions

摘要

This study examines the relationship between financial risk and acquirer's stockholder wealth in mergers and acquisitions. Under this detailed methodological framework, our results reveal several new findings which were not observed in extant studies: (1) Acquirers as a group have low financial risk when measured with Altman's Z-score or default risk derived from BlackScholes-Merton framework. (2) Default risk provides a more powerful measure on the acquirer's successful takeover probabilities than the Z-score valuation. (3) The lower default risk the acquirer has, the higher successful takeover probabilities. (4) Takeovers create value for acquirers with higher default risk.