The rationality of M&A targets in the choice of payment methods

Michael Klitzka, Jianan He and Dirk Schiereck

Publications of Darmstadt Technical University, Institute for Business Studies (BWL) from Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL)

Abstract: This study analyzes mergers and acquisitions (M&A) payment methods in large transactions of public U.S. acquirers between 2009 and 2016. While we find consistent with previous evidence that asymmetric information between acquirers and targets significantly influences the choice of M&A payment methods, we show that contrary to prevailing findings in the literature, acquirers cannot exploit their overvaluation through stock-financed M&A at targets’ disadvantage. In addition, when facing larger uncertainty in the counterparty’s valuation, a higher ratio of cash is applied in M&A payment. Our results document that both acquirers and targets are rational in choosing M&A payment methods.

Date: 2024-04-02
New Economics Papers: this item is included in nep-cfn, nep-com, nep-dcm and nep-reg
Note: for complete metadata visit http://tubiblio.ulb.tu-darmstadt.de/144309/
References: Add references at CitEc
Citations:

Published in Review of Managerial Science 4 (2024-04-02) : pp. 933-967

Downloads: (external link)
https://tuprints.ulb.tu-darmstadt.de/23548
https://doi.org/10.1007/s11846-021-00469-6
https://link.springer.com/article/10.1007/s11846-021-00469-6

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:dar:wpaper:144309

Access Statistics for this paper

More papers in Publications of Darmstadt Technical University, Institute for Business Studies (BWL) from Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL) Contact information at EDIRC.
Bibliographic data for series maintained by Dekanatssekretariat ().