Determinants of payment method in cross-border mergers and acquisitions.

• Main Authors: Lin, Yujun., Tan, Iris Sze Yun., Tay, Ying Shen.
• Other Authors: Ho, Kim Wai
• Format: Final Year Project
• Published: 2008
• Subjects: DRNTU::Business::Finance::Mergers and acquisitions
• Online Access: http://hdl.handle.net/10356/10193
• Institution: Nanyang Technological University

This paper aims to pioneer the investigation of payment method determinants unique to cross-border Merger and Acquisition transactions. First, we extend the existing literature to a sample of 469 cross-border deals over the period 2001-2005. We find strong evidence that the existing hypotheses still apply in an international context. More importantly, we propose and test additional cross-border considerations in order to generate a better understanding of method of payment motivations specific to international deals. While exchange-rate volatility did not appear to affect the choice of payment method, we find strong evidence that stock payment is more likely when both parties are listed on a common stock exchange. The further application of a stock-market development variable showed that target shareholders consider transaction costs in their decision to accept stock payment from a foreign acquirer. Lastly, we find that acquirers from more liquid stock markets possess stock which is viewed as a more attractive payment method in cross-border transactions.