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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.

Suggested Citation

  • Ismail, Ahmad & Krause, Andreas, 2010. "Determinants of the method of payment in mergers and acquisitions," The Quarterly Review of Economics and Finance, Elsevier, vol. 50(4), pages 471-484, November.
  • Handle: RePEc:eee:quaeco:v:50:y:2010:i:4:p:471-484
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. 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.
    2. Hubert De La Bruslerie, 2015. "Analysts' forecast revisions and informativeness of the acquirer's stock after M&A transactions," Post-Print hal-01505385, HAL.
    3. Nils Patschureck & Friedrich Sommer & Arnt Wöhrmann, 2015. "Contract design as a risk management tool in corporate acquisitions: theoretical foundations and empirical evidence," Journal of Management Control: Zeitschrift für Planung und Unternehmenssteuerung, Springer, vol. 26(4), pages 279-316, October.
    4. 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.
    5. repec:dau:papers:123456789/14996 is not listed on IDEAS
    6. repec:eee:quaeco:v:65:y:2017:i:c:p:227-239 is not listed on IDEAS
    7. Fomin, M., 2016. "Business cycles and acquisition policy: Analysis of M&A deals of metallurgical companies," Working Papers 6441, Graduate School of Management, St. Petersburg State University.

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