Financing Decisions and Capital Structure Dynamics in Cross-Border Acquisitions: A Case Study of an Indonesian Pharmaceutical Company

Abstract

dynamics in cross-border acquisitions undertaken by Indonesian pharmaceutical firms. Cross-border acquisitions in the pharmaceutical industry present high complexity and financial risk, yet limited research has explored how emerging market firms finance such transactions and manage post-acquisition capital structure adjustments. This research aims to analyze funding strategies, leverage changes, financial risk implications, and post-acquisition capital structure adjustments in Indonesian pharmaceutical companies. Using a multiple case study approach, the research evaluated three Indonesian pharmaceutical companies that conducted cross-border acquisitions in different countries, with analysis covering one year before to three years after the transaction. The findings reveal that funding strategies vary significantly across companies, ranging from internal funding to debt-based and combined debt-equity financing. Debt-based funding increases post-acquisition leverage and financial risk, potentially leading to financial distress in the short term, while internal funding maintains financial stability despite international expansion. The results also show that capital structures continue to undergo adjustments through deleveraging and cash flow optimization. The study contributes to the literature on financing decisions and capital structure in cross-border settings, particularly in the context of emerging markets and the highly regulated pharmaceutical industry, and offers practical recommendations for company management in designing balanced funding strategies between growth and financial stability.