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Leverage Deviations and Acquisition Probability in the UK: The Moderating Effect of Firms' Internal Capabilities and Deal Diversification Potential

Agyei-Boapeah, Henry; Osei, Deborah; Franco, Michael

Leverage Deviations and Acquisition Probability in the UK: The Moderating Effect of Firms' Internal Capabilities and Deal Diversification Potential Thumbnail


Authors

Henry Agyei-Boapeah

Deborah Osei

Michael Franco



Abstract

In the context of mergers and acquisitions, we provide evidence to suggest that a firm's deviation from its optimal financial leverage may impede its ability to undertake future expansions. We also find the negative effect of leverage deviation on acquisition probability to be moderated by firms' existing capabilities. Further, we find those deviating firms to have better prospects of achieving growth when they pursue cross-industry and/or crosscountry mergers and acquisitions. Overall, our findings imply that deviations from the optimal financial leverage may be costly to firms but this cost is not symmetric across all firms and all deal types.

Citation

Agyei-Boapeah, H., Osei, D., & Franco, M. (2019). Leverage Deviations and Acquisition Probability in the UK: The Moderating Effect of Firms' Internal Capabilities and Deal Diversification Potential. European Management Review, 16(4), 1059-1077. https://doi.org/10.1111/emre.12307

Journal Article Type Article
Acceptance Date May 15, 2018
Online Publication Date Jul 5, 2018
Publication Date 2019
Deposit Date Jul 1, 2021
Publicly Available Date Mar 29, 2024
Journal European Management Review
Print ISSN 1740-4754
Electronic ISSN 1740-4762
Publisher Wiley
Peer Reviewed Peer Reviewed
Volume 16
Issue 4
Pages 1059-1077
DOI https://doi.org/10.1111/emre.12307
Keywords optimal leverage; industrial diversification; geographic diversification; internal capabilities; mergers and acquisitions (M&A)
Public URL https://nottingham-repository.worktribe.com/output/5750604
Publisher URL https://onlinelibrary.wiley.com/doi/10.1111/emre.12307
Additional Information This is the peer reviewed version of the following article: Agyei-Boapeah, H., Osei, D., and Franco, M. (2019) Leverage Deviations and Acquisition Probability in the UK: The Moderating Effect of Firms’ Internal Capabilities and Deal Diversification Potential. European Management Review, 16: 1059– 1077., which has been published in final form at https://doi.org/10.1111/emre.12307. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions

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