We appreciate helpful comments and suggestions from Bill Christie (the editor), an anonymous referee, and participants at the 2006 Financial Management Association Annual Meeting and 2006 Multinational Finance Society Annual Meeting.
Derivatives Use, Information Asymmetry, and MNC Post-Acquisition Performance
Version of Record online: 2 SEP 2009
© 2009 Financial Management Association International
Volume 38, Issue 3, pages 631–661, Autumn 2009
How to Cite
Lin, J. B., Pantzalis, C. and Park, J. C. (2009), Derivatives Use, Information Asymmetry, and MNC Post-Acquisition Performance. Financial Management, 38: 631–661. doi: 10.1111/j.1755-053X.2009.01050.x
- Issue online: 2 SEP 2009
- Version of Record online: 2 SEP 2009
We utilize a sample of US acquiring firms that engaged in international M&As to document the effects of corporate derivatives use on post-M&A long-term performance. We find that derivatives users outperform nonusers. Furthermore, we find that acquirers with derivative policies that are more comprehensive and sophisticated outperform those with less comprehensive and sophisticated policies. They, in turn, outperform acquirers with no existing policies in place. Our results are consistent with the notion that the use of derivatives lowers information asymmetry related agency problems. Furthermore, our evidence indicates that derivatives use is an important corporate activity that has a profound effect on post-M&A performance.