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Unlocking the mergers and acquisitions puzzle in the United Arab Emirates: investigating the impact of corporate leverage on target selection and payment methods

Lookup NU author(s): Dr Yousry AhmedORCiD

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This work is licensed under a Creative Commons Attribution 4.0 International License (CC BY 4.0).

Abstract

Following a long stream of literature on the drivers of Mergers and Acquisition (M&A) activities, this study examines the effect of corporate leverage on several decisions of M&A deals in the context of the United Arab Emirates (UAE). Using M&A data from the Thomson One database for the period between 2005 and 2022, we find that corporate leverage significantly influences the type of M&A target. This study further adds to the prior literature on the contradictory behaviours of high- and low-leverage firms by examining whether acquisition decisions differ amongst them in M&A deals in the UAE context. Results indicate that high (low) leverage firms are less (more) likely to acquire private targets and more (less) inclined to acquire a target from a different (same) industry. Furthermore, our results show that the relationship between the method of payment used in M&A deals and corporate leverage is insignificant. We control for endogeneity using Heckman’s two-stage method. In brief, this paper extends the literature with conclusive evidence that considerations of capital structure can significantly anticipate and explain firms’ behaviour toward M&A choices. The implication of findings may include a call to reform some aspects of the Competition Law in the UAE by requiring private firms to enhance their disclosure practices similar to their public counterparts.

Publication metadata

Author(s): Elmassri M, Elrazaz T, Ahmed Y

Publication type: Article

Publication status: Published

Journal: PLoS ONE

Year: 2024

Volume: 19

Issue: 3

Online publication date: 13/03/2024

Acceptance date: 12/02/2024

Date deposited: 18/02/2024

ISSN (electronic): 1932-6203

Publisher: Public Library of Science

URL: https://doi.org/10.1371/journal.pone.0299717

DOI: 10.1371/journal.pone.0299717

Data Access Statement: All relevant data are within the manuscript and its Supporting Information files.

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