The Effect of Corporate Financial Leverage on Cross-Border Acquisition Probability by US High-Tech and Low-Tech Companies

This work is examining the impact of financial leverage on the cross-border merger and acquisition likelihood. Particularly, the point of interest is the extent to which leverage deficit or surplus influences decisions to initiate M&A deals. A financial leverage surplus puts restrictions on the possibility of mergers and acquisitions, so we are also studying the factors that affect the level of financial leverage in the company. Our empirical results are based on a large sample of US firms in the period from 2006 to 2017. The empirical analysis carried out in this work complements the existing literature on the relationship between corporate financial and investment decisions, like mergers and acquisitions. The relationship between a high leverage and the probability of making an acquisition is weaker for low-tech companies. Thus, when managers of high-tech companies decide to change their financial leverage, they should take into account the deviation from the optimal level of financial leverage and future plans for mergers and acquisitions.