Does the threat of takeover affect default risk?

We examine the impact of threat takeovers on default risk. Using a sample 50,189 firm-year observations for US firms over period 1990–2015, we find that has negative relation with use difference-in-difference analysis to address potential endogeneity concerns and propensity score matching control self-selection bias. The results are robust alternative measures risk exclusion dot com financial crisis periods. Our also hold after controlling Governance Index Entrenchment Index. identify improvement in performance earnings quality response as channels underlying our main result. effect is more pronounced opaque information environment low institutional ownership. findings provide important insights market corporate disciplining mechanism reducing