Target Capital Structure and Acquisition Choices: Evidence from the Greek Market

Spoudai, Vol. 58, Nos. 1-2, pp. 274-284, 2008

11 Pages Posted: 26 Sep 2010

See all articles by Dimitrios Vasiliou

Dimitrios Vasiliou

National and Kapodistrian University of Athens

Nikolaos Eriotis

National and Kapodistrian University of Athens

Nikolaos Daskalakis

Panteion University

Date Written: 2008

Abstract

The main objective of this paper is to analyze whether deviations from the target capital structure affect firms’ decisions to become acquirers. The analysis is conducted in two stages. In the first stage we estimate the target leverage ratio considering the main determinants of capital structure. In the second stage we examine whether the deviation from the predicted target debt ratio affects acquisition choices. Our data comes from 112 Greek companies listed on the Athens Exchange during 1997–2002. Our empirical results justify our hypothesis that the leverage deficit is negatively related to the probability of a firm becoming an acquirer. Thus, underleveraged firms, according to their target capital structure, are more likely to become acquirers than overleveraged firms. We also test whether size and profitability affect acquisition choices and we find that larger firms are more likely to become acquirers, whereas profitability does not seem to play an important role. Results and conclusions are consistent with similar studies conducted for other economies.

Keywords: Corporate Finance, Capital Structure, Mergers and Acquisitions, Financial Leverage Deficit, Greek Firms

JEL Classification: G3, G32

Suggested Citation

Vasiliou, Dimitrios and Eriotis, Nikolaos and Daskalakis, Nikolaos, Target Capital Structure and Acquisition Choices: Evidence from the Greek Market (2008). Spoudai, Vol. 58, Nos. 1-2, pp. 274-284, 2008, Available at SSRN: https://ssrn.com/abstract=1682049

Dimitrios Vasiliou

National and Kapodistrian University of Athens ( email )

Athenes
Greece
0030 210 3689486 (Phone)

Nikolaos Eriotis

National and Kapodistrian University of Athens ( email )

5 Stadiou Strt
Athens, 12131
Greece

Nikolaos Daskalakis (Contact Author)

Panteion University ( email )

136 Sygrou
Athens
Greece
GR17671 (Fax)

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