美联储-贷款人审查下的企业并购（英）-2024.4-56页

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Finance and Economics Discussion Series

Federal Reserve Board, Washington, D.C.

ISSN 1936-2854 (Print)

ISSN 2767-3898 (Online)

Corporate Mergers and Acquisitions Under Lender Scrutiny

Buhui QIu, Teng Wang

2024-025

Please cite this paper as:

QIu, Buhui, and Teng Wang (2024). “Corporate Mergers and Acquisitions Under Lender

Scrutiny,” Finance and Economics Discussion Series 2024-025. Washington: Board of Gov-

ernors of the Federal Reserve System, https://doi.org/10.17016/FEDS.2024.025.

NOTE: Staﬀ working papers in the Finance and Economics Discussion Series (FEDS) are preliminary

materials circulated to stimulate discussion and critical comment. The analysis and conclusions set forth

are those of the authors and do not indicate concurrence by other members of the research staﬀ or the

Board of Governors. References in publications to the Finance and Economics Discussion Series (other than

acknowledgement) should be cleared with the author(s) to protect the tentative character of these papers.

Corporate Mergers and Acquisitions Under Lender Scrutiny *

Buhui Qiu†

University of Sydney

Teng Wang‡§

Federal Reserve Board

January 2024

Abstract

This paper examines corporate mergers and acquisitions (M&A) outcomes under

lender scrutiny. Using the unique shocks of U.S. supervisory stress testing, we ﬁnd

that ﬁrms under increased lender scrutiny after their relationship banks fail stress

tests engage in fewer but higher-quality M&A deals. Evidence from comprehensive

supervisory data reveals improved credit quality for newly originated M&A-related

loans under enhanced lender scrutiny. This improvement is further evident in positive

stock return reactions to M&A deals ﬁnanced by loans subject to enhanced lender

scrutiny. As companies engage in fewer but higher-quality deals, they also experience

higher returns on assets. Our ﬁndings highlight the importance of lender scrutiny in

corporate M&A activities.

JEL Classification: G21; G34.

Keywords: Mergers and Acquisitions; Lender Scrutiny; Stress Tests.

The views expressed in this paper are solely those of the authors and should not be interpreted as

reﬂecting the views of the Federal Reserve Board or the Bank for International Settlements. We thank

Xiaohu Deng, Bora Durdu, Isil Erel (discussant), Croci Ettore (discussant), Kathleen Johnson, Tümer Kapan

(discussant), Doowon Lee, Jane Luo, Doriana Rufﬁno, Thomas To, Kangzhen (Ken) Xie (discussant), Alfred

Yawson, Steven Ongena, conference participants at Midwest Finance Association Annual Meeting, the

Federal Reserve Stress Testing Research Conference, the Paris December Finance Meeting, and the Financial

Management Association Annual Meeting, and seminar participants at the Federal Reserve Board, Colorado

State University, the Financial Services Agency of Japan, the University of Adelaide, the University of

Newcastle, the University of Sydney and the University of Tasmania for helpful comments and suggestions

on the paper. All errors are our own.

†

The University of Sydney Business School, Address: The Codrington Building, The University of

Sydney, NSW 2006, Australia. Email: buhui.qiu@sydney.edu.au.

‡

Board of Governors of the Federal Reserve System. Address: 20th St. and Constitution Ave. N.W.,

Washington, DC 20551. USA. Email: teng.wang@frb.gov.

§The Bank for International Settlements, Centralbahnplatz 2, CH4002 Basel, Switzerland.

"The Federal Reserve is strongly committed to stress testing as a cornerstone of our bank

supervisory and ﬁnancial stability missions. Stress testing is perhaps the most successful

supervisory innovation of the post-crisis era."

—Jerome H Powell

1 Introduction

Despite trillions of dollars spent on corporate mergers and acquisitions (M&A) each

year, the evidence in the literature clearly indicates that these transactions do not always

beneﬁt acquiring ﬁrms’ shareholders. The literature suggests that executives often engage

in agency-motivated acquisitions to beneﬁt themselves (e.g., Grinstein and Hribar 2004;

Harford and Li 2007;Ishii and Xuan 2014) at the expense of shareholders. M&A can

even lead to signiﬁcant shareholder wealth destruction (e.g., Moeller et al. 2004;Moeller

et al. 2005). Banks, a major source of funding for corporate M&A activity,

are known for

their special ability in scrutinizing loan applications and investment projects of higher

quality (e.g., Stiglitz and Weiss 1981;Bester 1985;Diamond 1991;Boyd and Prescott 1986;

Marquez 2002). Can enhanced lender scrutiny affect corporate M&A activity and the

shareholder value of acquiring ﬁrms? This paper examines corporate M&A outcomes

under enhanced lender scrutiny following the unique shocks of bank stress test failures.

Testing the direct effects of lender scrutiny on corporate M&A activities presents

several identiﬁcation challenges. One issue is that the strength of lender scrutiny cannot

be directly observed or measured. Additionally, even if it could be observed, the level of

scrutiny would likely be correlated with various characteristics of corporate borrowers,

making it difﬁcult to establish causality. In this study, we consider banks failing the

Federal Reserve’s forward-looking stress tests as signiﬁcant events that directly increase

the loan scrutinizing incentives of the failed banks. Our ﬁndings indicate a signiﬁcant

Financing corporate M&A often involves mega-syndicated loans. For example, when ﬁnancing its

acquisition of Aetna in 2018, CVS entered into a $5 billion unsecured term loan agreement with a maturity

of three to ﬁve years.

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FinanceandEconomicsDiscussionSeriesFederalReserveBoard,Washington,D.C.ISSN1936-2854(Print)ISSN2767-3898(Online)CorporateMergersandAcquisitionsUnderLenderScrutinyBuhuiQIu,TengWang2024-025Pleasecitethispaperas:QIu,Buhui,andTengWang(2024).“CorporateMergersandAcquisitionsUnderLenderScrutiny,”FinanceandE...

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