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Mergers and Default Risk: Explaining the Change in Default Risk of Swedish Acquirers

Johannsson, Johann Steinar LU and Kopitz, Tobias (2012) BUSN89 20121
Department of Business Administration
Abstract (Swedish)
The purpose of this thesis is to examine the impact of mergers on the acquirers’ default risk for a sample of Swedish companies during the period of 2002–2011. In order to establish that we will study the changes in default risk, as measured under the Merton framework (1974) pre- and post-merger and analyse the effects of a number of different explanatory variables on these risk changes. Our study aims at identifying characteristics of the acquirer, target or the merger itself that can be associated with increased default risk post-merger.
We find mergers to decrease probabilities of default and confirm that changes in default risk post-merger are influenced by a mixture of acquirer, target and merger characteristics. While the average... (More)
The purpose of this thesis is to examine the impact of mergers on the acquirers’ default risk for a sample of Swedish companies during the period of 2002–2011. In order to establish that we will study the changes in default risk, as measured under the Merton framework (1974) pre- and post-merger and analyse the effects of a number of different explanatory variables on these risk changes. Our study aims at identifying characteristics of the acquirer, target or the merger itself that can be associated with increased default risk post-merger.
We find mergers to decrease probabilities of default and confirm that changes in default risk post-merger are influenced by a mixture of acquirer, target and merger characteristics. While the average asset volatility of acquirers increases post-merger we also find a significant decrease in leverage post-merger, contributing to a decrease in probabilities of default. (Less)
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author
Johannsson, Johann Steinar LU and Kopitz, Tobias
supervisor
organization
course
BUSN89 20121
year
type
H1 - Master's Degree (One Year)
subject
keywords
default risk, distance to default, mergers, probabilities of default, information asymmetry, idiosyncratic risk, ownership, diversification, leverage, announcement effect, managerial overconfidence
language
English
id
2544129
date added to LUP
2012-06-25 10:18:14
date last changed
2012-06-25 10:18:14
@misc{2544129,
  abstract     = {The purpose of this thesis is to examine the impact of mergers on the acquirers’ default risk for a sample of Swedish companies during the period of 2002–2011. In order to establish that we will study the changes in default risk, as measured under the Merton framework (1974) pre- and post-merger and analyse the effects of a number of different explanatory variables on these risk changes. Our study aims at identifying characteristics of the acquirer, target or the merger itself that can be associated with increased default risk post-merger.
We find mergers to decrease probabilities of default and confirm that changes in default risk post-merger are influenced by a mixture of acquirer, target and merger characteristics. While the average asset volatility of acquirers increases post-merger we also find a significant decrease in leverage post-merger, contributing to a decrease in probabilities of default.},
  author       = {Johannsson, Johann Steinar and Kopitz, Tobias},
  keyword      = {default risk,distance to default,mergers,probabilities of default,information asymmetry,idiosyncratic risk,ownership,diversification,leverage,announcement effect,managerial overconfidence},
  language     = {eng},
  note         = {Student Paper},
  title        = {Mergers and Default Risk: Explaining the Change in Default Risk of Swedish Acquirers},
  year         = {2012},
}