Bank Dependence and Bank Financing in Corporate M&A

Sheng Huang, Ruichang Lu, Anand Srinivasan

Research output: Contribution to journalJournal

2 Citations (Web of Science)


We examine the valuation impact of bank-financed mergers and acquisitions (M&As) and the loan contracts used to finance M&A transactions, focusing on the difference between bank-dependent acquirers and other acquirers. We find that bank-financed deals have higher acquirer’s cumulative abnormal returns relative to other cash M&A deals, but this certification effect exists only for bank-dependent acquirers. Despite bank-dependent acquirers being more susceptible to hold-up, banks do not impose higher loan pricing or more stringent nonprice terms on them. After completion of the acquisition, bank-dependent acquirers retain the M&A financing banks for a much larger share of their borrowing needs, suggesting the importance of repeat business for lack of hold-up. Our findings highlight the positive aspects of bank dependence and the importance of implicit contracting for the lack of hold-up in lending markets.
Original languageEnglish
Pages (from-to)2250-2283
Number of pages34
JournalManagement Science
Issue number3
Publication statusPublished - Mar 2022


  • bank dependence
  • M&A
  • bank financing
  • creditor monitoring


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