This paper examines the effects of the post-merger
integration duration on acquiring firms’ leverage
behavior before and after a merger, using a dynamic
model in which full merger benefits cannot be consumed
at the time of a merger, but rather after a
pre-specified post-merger transition period that is
associated with various integration costs. The model
generates new implications pertaining to acquiring
firms’ leverage dynamics in the pre- and post-merger
periods along with the method of payment choice.
Specifically, the model indicates that the post-merger
integration duration is negatively associated with the
market leverage of newly-merged firms at the time of a
merger and throughout the post-merger integration
period. In addition, acquiring firms are more likely to
use equity to finance a merger when the integration
duration is expected to be lengthy. pdf 2011
