An Analysis of Merger Financing

Austin Murphy and Kevin Nathan

The Financial Review, 1989, vol. 24, issue 4, 551-66

Abstract: This research analyzes a theory of merger financing that indicates that the terms of payment for target shares should be used to optimally influence the postmerger liquidity and capital structure of the combined firm. In an empirical test on a large sample of mergers, the stock market reaction to the announcement of acquisition financing is found to support the theory. The empirical results also indicate that a large portion of the cross-sectional return differences on acquirers' shares can be explained by financing theory. Copyright 1989 by MIT Press.

Date: 1989
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Persistent link: https://EconPapers.repec.org/RePEc:bla:finrev:v:24:y:1989:i:4:p:551-66

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