Does payment method matter in cross-border acquisitions?

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School of Business | Bachelor's thesis
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Date

2023

Department

Rahoituksen laitos

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Mcode

Degree programme

Rahoitus

Language

en

Pages

29+2

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Abstract

This bachelor's thesis examines how the choice of payment method in cross-border mergers and acquisitions impacts the stock returns of the acquiring company. It aims to determine whether this effect is linked to the acquirer's long-term stock performance or influenced by the characteristics of the target country. I gather a sample of 12091 deals done by public US companies acquiring public and private targets during 2010-2022. During the period US acquirers earn significantly positive abnormal announcement returns of 2.653% when they choose to use stock as the payment method in cross-border acquisitions. The effect remains significant, even after controlling for other well-known factors affecting acquirer returns. However, during a one-year buy-and-hold-period, cross-border acquirers using stock earn worse abnormal returns, compared to acquirers using cash. My results also highlight that as the information asymmetries rise in M&A, the market prefers all-stock financed deals.

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Thesis advisor

Lof, Matthijs

Keywords

acquisitions, form of payment, bidder gains, information asymetries

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https://urn.fi/URN:NBN:fi:aalto-202401281886

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[kand] Kauppakorkeakoulu / BIZ