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  • The Impact of Capital Structure of the Companies on a Value Creation in Mergers and Acquisitions in Emerging Capital Markets

Student
Title
Supervisor
Faculty
Educational Programme
Final Grade
Year of Graduation
Karina Dibirova
The Impact of Capital Structure of the Companies on a Value Creation in Mergers and Acquisitions in Emerging Capital Markets
Corporate Finance
(Master’s programme)
2017
A significant increase in the activity of the M & A market makes it necessary to carefully analyze the results and identify significant determinants of creating value for newly formed companies. One of the most important indicators affecting both financial results and market value is the company's capital structure. Empirical studies of the markets of developed and developing countries come to the conclusion that there is a target level of the capital structure, the pursuit of which will make it possible to achieve a balance in the advantages and disadvantages of loan financing. This assumption indicates the presence of the influence of the deviation of the company's capital structure from the target level, to a greater or lesser extent, on the results of significant transactions carried out by companies. An example of one such transaction is the M & A transaction.

In this paper, we analyze the effect of the deviation of the capital structure of the buyer companies from the target level for the effectiveness of M & A transactions in BRICS and Eastern Europe. The main assumption of the study is the high degree of risks in M & A transactions by companies with a capital structure above the target level, which in turn characterizes the low activity of M & A transactions in this cluster of enterprises. The results obtained serve as a starting point in the study of the main issue - the effectiveness of M & A transactions - because high risks require the detailed analysis of the projects under consideration and the decision by the managers and owners of the company to make a measured decision on the implementation of the planned actions.

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