The Method of Payment in M&A and Acquirer Stock Returns

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2022-08-31

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en

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This study investigates the effect of payment methods in M&A transactions on the acquirer’s returns. An event study analysis was performed first to obtain the acquirer’s abnormal returns. The data consists of 2 995 deals for a period of 2015-2021. The results showed that the cumulative abnormal returns for the acquirer are positive and significantly different from zero. Next to that an OLS regression was conducted using the acquirer’s abnormal returns as dependent variable and the method of payments as independent variables. The findings from the regression show that on average the acquirer’s abnormal returns are higher in cash financed deals compared to equity financed transactions. However, the results were not significant. In addition, the CARs for the acquirer are significantly higher in M&A transactions financed by a combination of cash and equity compared to equity financed transactions. To test the validity of these findings three different robustness checks were performed. Significant changes in the results have been observed only when private targets were excluded from the sample.

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Faculteit der Managementwetenschappen