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Determinants of the method of payment in mergers and acquisitions

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  • Ismail, Ahmad
  • Krause, Andreas

Abstract

We empirically investigate the determinants of the payment form in mergers and acquisitions and introduce new variables on the target and acquirer investment characteristics to evaluate whether the concerns of target and acquirer shareholders are taken into account. Our sample encompasses mergers between publicly listed US companies from 1985 to 2004. Similarly we also consider the determinants of announcement returns using the same set of variables. We establish the relevance of a previously unreported variable for the determination of the payment form, the correlation of returns between target and acquirer, besides the more established determinants hostile takeovers, and defence mechanisms; weak evidence is found for the significance of budget constraints and no evidence for asymmetric information or tax considerations being a relevant factor. We do not find that announcement returns are explained by the variables considered.

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Bibliographic Info

Article provided by Elsevier in its journal The Quarterly Review of Economics and Finance.

Volume (Year): 50 (2010)
Issue (Month): 4 (November)
Pages: 471-484

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Handle: RePEc:eee:quaeco:v:50:y:2010:i:4:p:471-484

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Web page: http://www.elsevier.com/locate/inca/620167

Related research

Keywords: Mergers Payment form Investment characteristics;

References

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Cited by:
  1. Scheuering, Uwe, 2013. "M&A and the Tax Benefits of Debt Financing," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79817, Verein für Socialpolitik / German Economic Association.

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