AbstractsBusiness Management & Administration

Financial intermediaries (such as banks) are delegated to monitor borrowers (Diamond, 1984). In the merger wave, many acquirers raise funds by borrowing syndicated loans to fund their M&A deals (Huang, Lu, & Srinivasan, 2012). However, banks’ monitoring of borrowers does not enhance firm value to the extent that the acquirers’ shareholders can benefit (Huang et al., 2012). Based on unadjusted measures, we found that M&A deals financed by syndicated loans experience better post-merger operating performance (ROA) and creditworthiness (Altman’s Z Score and EDF). M&A deals financed by relationship lenders experience better post-merger operating performance (ROA) and creditworthiness (EDF). M&A deals financed by reputable lenders experience better post-merger operating performance (ROA) and creditworthiness (Altman’s Z Score and EDF). However, M&A deals financed by institutional lenders experience worse post-merger operating performance (ROA) and worse creditworthiness (EDF), and transactional lenders have almost no impact on the borrowers’ post-merger operating performance and creditworthiness. Advisors/Committee Members: Shao, Pei, Tian, Gloria.