How the means of payment decision influences M&A performance: A comparative study

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Mergers and acquisitions (M&A) have been a topic of interest for decades within the field of corporate finance. This paper contributes to the literature by examining the influence of the means of payment decisions on M&A performance in a short-term event study. As previous studies mainly focused on the United States, this study makes a comparison between the United States and the developing Asian region for takeover transactions from 2009 until 2017. Based on a sample consisting of 780 US deals and 749 Asian deals, the means of payment is measured using either a dummy variable for the payment category or by the relative portion of equity in the consideration. Furthermore, the differences between US acquirers and Asian with regard to means of payment preferences are evaluated, as well as the differences in overall M&A performance between these regions. The results indicate that cash-paid takeovers outperform equity-paid and mixed-paid takeovers, as well as an overall negative influence of equity involvement on takeover performance. However, Asian firms show a slight tendency towards involving equity in their bids, whereas US firms show a strong preference for cash-payments. Keywords: Merger and acquisitions (M&A), means of payment decision, United States, Asia, comparative event study
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