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Time trends and determinants of the method of payment in M&As

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  • Boone, Audra L.
  • Lie, Erik
  • Liu, Yixin

Abstract

We examine the time trends and determinants of the method of payment in M&As spanning four decades. The fraction of mixed payments tripled from about 10% before the turn of the century to 30% in the new century, while the fraction of stock (cash) payments peaked (bottomed out) in the late 1990s but has since plunged (surged). We can explain a portion, but not all, of these trends using explanatory variables linked to adverse selection theory, taxation, and contracting costs. We also show that mixed payments are not merely hybrids between cash and stock payments, but have unique determinants and features.

Suggested Citation

  • Boone, Audra L. & Lie, Erik & Liu, Yixin, 2014. "Time trends and determinants of the method of payment in M&As," Journal of Corporate Finance, Elsevier, vol. 27(C), pages 296-304.
  • Handle: RePEc:eee:corfin:v:27:y:2014:i:c:p:296-304
    DOI: 10.1016/j.jcorpfin.2014.05.015
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    References listed on IDEAS

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    Cited by:

    1. Romero, Hector & Fajardo, Eddy Johanna, 2015. "Incidencia del desempeño de la acción sobre los eventos de fusiones y adquisiciones en América Latina (2005-2009)
      [Stock performance and mergers and acquisitions: Evidence for Latin America (2005-2
      ," MPRA Paper 69695, University Library of Munich, Germany.
    2. repec:eee:jfinec:v:128:y:2018:i:3:p:443-465 is not listed on IDEAS
    3. repec:eee:jbfina:v:88:y:2018:i:c:p:408-422 is not listed on IDEAS
    4. Gu, Lulu & Reed, W. Robert, 2016. "Does financing of Chinese mergers and acquisitions have “Chinese characteristics”?," Economics Letters, Elsevier, vol. 139(C), pages 11-14.
    5. Pierpaolo Battigalli & Carlo Chiarella & Stefano Gatti & Tommaso Orlando, 2017. "M&A negotiations with limited information: how do opaque firms buy and get bought?," Working Papers 596, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    6. repec:eee:iburev:v:26:y:2017:i:3:p:461-475 is not listed on IDEAS
    7. Huang, Peng & Officer, Micah S. & Powell, Ronan, 2016. "Method of payment and risk mitigation in cross-border mergers and acquisitions," Journal of Corporate Finance, Elsevier, vol. 40(C), pages 216-234.
    8. Eckbo, B Espen & Makaew, Tanakorn & Thorburn, Karin S, 2017. "Are stock-financed takeovers opportunistic?," CEPR Discussion Papers 11974, C.E.P.R. Discussion Papers.
    9. Kien Dinh Cao & Thuy Thu Nguyen & Giang Thi Thu Dao, 2016. "Payment Methods in Acquisitions of Association of Southeast Asian Nations Bidders," International Journal of Economics and Financial Issues, Econjournals, vol. 6(4), pages 1707-1715.

    More about this item

    Keywords

    Takeovers; Method of payment; Time trends;

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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