Time trends and determinants of the method of payment in M&As |
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| Institution: | 1. Mays Business School, Texas A&M University, College Station, TX 77843, United States;2. Henry B. Tippie College of Business, University of Iowa, Iowa City, IA 52242, United States;3. Peter T. Paul College of Business and Economics, University of New Hampshire, Durham, NH 03824, United States;1. EMLYON Business School, France;2. Cass Business School City University, London, United Kingdom;1. Finance Department, 2317 SH/DH University of Pennsylvania, The Wharton School, University of Pennsylvania, Philadelphia, PA 19104, United States;2. Securities and Exchange Commission, 44 Montgomery Street, San Francisco, CA 94104, United States;3. Rutgers School of Business-Camden, Camden, NJ 08102, United States;4. The Brattle Group, 201 Mission Street, San Francisco, CA 94105, United States;1. Bauer College of Business, University of Houston, Houston, TX 77204, United States;2. School of Business and Economics, Universidad de los Andes, Santiago, Chile;1. Department of Finance, Deakin University, Melbourne, Australia;2. International Center for Financial Research, Jiangxi Normal University, China 99 Ziyang Road, Nanchang, Jiangxi 330022, China |
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| Abstract: | We examine the time trends and determinants of the method of payment in M&As spanning four decades. The fraction of mixed payments tripled from about 10% before the turn of the century to 30% in the new century, while the fraction of stock (cash) payments peaked (bottomed out) in the late 1990s but has since plunged (surged). We can explain a portion, but not all, of these trends using explanatory variables linked to adverse selection theory, taxation, and contracting costs. We also show that mixed payments are not merely hybrids between cash and stock payments, but have unique determinants and features. |
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