M&As, Investment and Financing Constraints

Abstract We use a panel data set of European firms to analyse the effects of domestic and international M&As on target firms’ investment, growth and financial constraints. Combining propensity score matching with a difference-in-differences estimator, our results indicate that upon acquisition, target firms obtain better access to external finance, are characterized by higher levels of tangible and intangible assets, and display lower dependence of investments and cash savings on the availability of internal funds. We also provide evidence that these effects are driven by acquisitions during the 2007–2009 financial crisis and relatively small target firms.