M&A Payment Method, Acquiror Returns, and Asymmetric Information: Evidence from Finland

Abstract

This bachelor's thesis studies the effect of the form of payment used in mergers and acquisitions on the acquiror’s stock return and whether the effect can be attributed to asymmetric information. I examine a sample of Finnish public companies acquiring public and private companies. The sample size is 150 acquisitions announced in 2011–2020. This thesis offers a fresh view on the subject in Finland's corner market. In Finland, the stock payment portion has an adverse effect of -1.9% on abnormal return around the announcement day of an acquisition of a public company. However, the impact is significant only in a two-day event window and it is not robust to firm and deal characteristics. This result suggests that real factors drive the acquirors’ returns in the Finnish market, not asymmetric information. Conversely, all-cash financing has a 1.7% abnormal announcement return in public acquisitions. Financing does not affect private acquisitions’ returns.