Financial constraints and synergy gains from mergers and acquisitions

Yang Duan, Yong Jin

Research output: Journal article publicationJournal articleAcademic researchpeer-review

9 Citations (Scopus)


This paper examines mergers and acquisitions motivated by financial constraints. Synergy gain is measured as the cumulative abnormal return of a value-weighted portfolio of the acquirer and the target around the acquisition announcement. By constructing a financial constraint difference between the target and the acquirer, we find a positive relationship between the financial constraint difference and synergy gains generated from the acquisition. The positive effect of the financial constraint difference is only significant for high growth targets and severely constrained targets. The acquirer's corporate governance also enhances the synergy gains created from the financial constraint difference. Additional evidence shows that both acquirer's and target's shareholders benefit from the financial constraint difference. Our results are robust for different measures of financial constraint.

Original languageEnglish
Pages (from-to)60-82
Number of pages23
JournalJournal of International Financial Management and Accounting
Issue number1
Publication statusPublished - 1 Feb 2019


  • acquisitions
  • financial constraint
  • mergers
  • synergy gains

ASJC Scopus subject areas

  • Accounting
  • Business, Management and Accounting (miscellaneous)
  • Finance


Dive into the research topics of 'Financial constraints and synergy gains from mergers and acquisitions'. Together they form a unique fingerprint.

Cite this