Mergers and acquisitions valuationthe choice of cash as payment method

  1. Isabel Feito Ruiz 1
  2. Ana Isabel Fernández 2
  3. Susana Menéndez Requejo 2
  1. 1 Universidad de León
    info

    Universidad de León

    León, España

    ROR https://ror.org/02tzt0b78

  2. 2 Universidad de Oviedo
    info

    Universidad de Oviedo

    Oviedo, España

    ROR https://ror.org/006gksa02

Revista:
Revista española de financiación y contabilidad

ISSN: 0210-2412

Año de publicación: 2015

Volumen: 44

Número: 3

Páginas: 326-351

Tipo: Artículo

DOI: 10.1080/02102412.2015.1045262 DIALNET GOOGLE SCHOLAR

Otras publicaciones en: Revista española de financiación y contabilidad

Resumen

This paper studies the relevance of the acquiring ownership structure and its legal and institutional environment on the decision to pay for a merger and acquisition (M&A) with cash and how this decision influences the acquiring shareholders ’ M&A valuation. At the same time, we deal with the potential endogeneity problem. The results show that the acquiring ownership structure and the legal and institutional environment influence both the choice of cash as the payment method and the acquiring share- holders ’ valuation, being the payment method an endogenous decision. High levels of ownership concentration in the acquiring firm or in countries with strong legal and institutional environments reduce the probability of cash paid M&As and provoke higher acquiring shareholders valuation around the announcement of an M&A paid in cash.

€ Ver financiación

Información de financiación

Financiadores

  • Regional Government of Asturias
    • Project SV-PA-13_ECOEMP-19
  • Spanish Ministry
    • ECO2012-31772

Referencias bibliográficas

  • A.Agrawal,, J.Jaffe,, & G.Mandelker, (1992). The post-merger performance of acquiring firms: A re-examination of an anomaly. TheJournal of Finance, 47, 1605–1621. doi:10.1111/j.1540-6261.1992.tb04674.x
  • G.Alexandridis,, A.Antoniou,, & H.Zhao, (2008). Belief asymmetry and gains from acquisitions. Journal of Multinational Financial Management, 18, 443–460. doi:10.1016/j.mulfin.2007.11.003
  • Y.Amihud,, B.Lev,, & N.G.Travlos, (1990). Corporate control & the choice of investment financing: The case of corporate acquisitions. TheJournal of Finance, 45(2), 603–616. doi:10.1111/j.1540-6261.1990.tb03706.x
  • P.Asquith,, R.Bruner,, & D.Mullins, (1983). The gains to bidding firms from merger. Journal of Financial Economics, 11, 121–139. doi:10.1016/0304-405X(83)90007-7
  • N.Basu,, L.Dimitrova,, & I.Paeglis, (2009). Family control and dilution in mergers. Journal of Banking & Finance, 33, 829–841. doi:10.1016/j.jbankfin.2008.09.017
  • P.G.Berger,, & E.Ofek, (1995). Diversification’s effect on firm value. Journal of Financial Economics, 37, 39–65. doi:10.1016/0304-405X(94)00798-6
  • A.Bris,, & C.Cabolis, (2008). The value of investor protection: Firm evidence from cross-border mergers. The Review of Financial Studies, 21, 605–648. doi:10.1093/rfs/hhm089
  • J.M.Campa,, & S.Kedia, (2002). Explaining the diversification discount. TheJournal of Finance, 57, 1731–1762. doi:10.1111/jofi.2002.57.issue-4
  • S.Chan,, & E.Mais, (2000). Managerial motives and merger financing. The Financial Review, 35, 139–152. doi:10.1111/fire.2000.35.issue-4
  • S.Chang, (1998). Takeovers of privately held targets, methods of payment, and bidder returns. TheJournal of Finance, 53, 773–784. doi:10.1111/jofi.1998.53.issue-2
  • C.J.Corrado, (1989). A nonparametric test for abnormal security-price performance in event studies. Journal of Financial Economics, 23, 385–395. doi:10.1016/0304-405X(89)90064-0
  • S.Djankov,, R.La Porta,, F.Lopez-de-Silanes,, & A.Shleifer, (2008). The law and economics of self-dealing. Journal of Financial Economics, 88, 430–465. doi:10.1016/j.jfineco.2007.02.007
  • S.Djankov,, C.McLiesh,, & A.Shleifer, (2007). Private credit in 129 countries. Journal of Financial Economics, 84, 299–29. doi:10.1016/j.jfineco.2006.03.004
  • P.Dodd,, & J.B.Warner, (1983). On corporate governance: A study of proxy contests. Journal of Financial Economics, 11, 401–438. doi:10.1016/0304-405X(83)90018-1
  • M.Dong,, D.Hirshleifer,, S.Richardson,, & S.H.Teoh, (2006). Does investor misvaluation drive the takeover market? TheJournal of Finance, 61, 725–762. doi:10.1111/jofi.2006.61.issue-2
  • A.Dyck,, & L.Zingales, (2004). Private benefits of control: An international comparison. TheJournal of Finance, 59(2), 537–600. doi:10.1111/jofi.2004.59.issue-2
  • M.Faccio,, & L.H.P.Lang, (2002). The ultimate ownership of Western European corporations. Journal of Financial Economics, 65, 365–395. doi:10.1016/S0304-405X(02)00146-0
  • M.Faccio,, & R.W.Masulis, (2005). The choice of payment method in European mergers and acquisitions. TheJournal of Finance, 60(3), 1345–1388. doi:10.1111/jofi.2005.60.issue-3
  • M.Faccio,, J.McConnell,, & D.Stolin, (2006). Returns to acquirers of listed and unlisted targets. Journal of Finance and Quantitative Analysis, 41, 198–20.
  • R.Franks,, R.S.Harris,, & C.Mayer, (1988). Means of payment in takeovers: Results for United Kingdom and the United States. In A.J.Auerbach (Ed.), Corporate takeovers: Causes and consequences (pp. 221–264). Chicago: University of Chicago Press.
  • K.Fuller,, J.Netter,, & M.Stegemoller, (2002). What do returns to acquiring firms tell us? Evidence from firms that make many acquisitions. TheJournal of Finance, 57, 1763–1793. doi:10.1111/jofi.2002.57.issue-4
  • J.Hagendorff,, K.Collins,, & K.Keasey, (2007). Investor protection and the value effects of bank merger announcements in Europe and the US. Journal of Banking & Finance, 54, 1969–1997.
  • R.Hansen, (1987). A theory for the choice of exchange medium in merger and acquisitions. Journal of Business, 60(1), 75–95.
  • J.Heckman, (1979). Sample selection bias as a specification error. Econometrica, 47, 153–161.
  • M.C.Jensen, (1986). Agency cost of free cash flow, corporate finance, and takeovers. American Economic Review, 76, 323–329.
  • D.Kaufmann,, A.Kraay,, & M.Mastruzzi,, 2007.Governance Matters VI: Governance Indicators for 1996–2006, World Bank Policy Research (June).
  • W.Kim, (2012). Investor protection and the mode of acquisition: Implications for ownership dilution and formation of pyramids. Financial Management, 41(1), 55–93. doi:10.1111/fima.2012.41.issue-1
  • R.La Porta,, F.López-de-Silanes,, A.Shleifer,, & R.Vishny, (1998). Law and finance. Journal of Political Economy, 106, 113–155.
  • K.J.Martin, (1996). The method of payment in corporate acquisitions, investment opportunities, and management ownership. TheJournal of Finance, 51, 1227–1246. doi:10.1111/j.1540-6261.1996.tb04068.x
  • M.Martynova,, & L.Renneboog, (2009). What determines the financing decision in corporate takeovers: Cost of capital, agency problems, or the means of payment?. Journal of Corporate Finance, 15, 290–315. doi:10.1016/j.jcorpfin.2008.12.004
  • M.Martynova,, & L.Renneboog, (2011). The performance of the European market for corporate control: Evidence from the fifth takeover wave. European Financial Management, 17, 208–259. doi:10.1111/eufm.2011.17.issue-2
  • S.B.Moeller,, F.P.Schlingemann,, & R.M.Stulz, (2004). Firm size and the gains from acquisitions. Journal of Financial Economics, 73, 201–228. doi:10.1016/j.jfineco.2003.07.002
  • S.Myers,, & N.Majluf, (1984). Corporate financing and investment decisions when firms have information that investors do not have. Journal of Financial Economics, 13, 187–221. doi:10.1016/0304-405X(84)90023-0
  • T.Nenova, (2003). The value of corporate voting rights and control: A cross-country analysis. Journal of Financial Economics, 68, 325–351. doi:10.1016/S0304-405X(03)00069-2
  • T.Nenova, (2006). Takeover laws and financial development (Working Paper No. 4029). Washington, DC: World Bank.
  • J.Netter,, M.Stegemoller,, & M.B.Wintoki, (2011). Implications of data screens on merger and acquisition analysis: A large sample study of mergers and acquisitions from 1992 to 2009. The Review of Financial Studies, 24, 2316–2357. doi:10.1093/rfs/hhr010
  • M.Officer,, A.Poulsen,, & M.Stegemoller, (2009). Target-firm information asymmetry and acquirer returns. Review of Finance, 13, 467–493. doi:10.1093/rof/rfn017
  • J.J.Reuer,, O.Shenkar,, & R.Ragozzino, (2004). Mitigating risk in international mergers an acquisitions: The role of contingent payouts. Journal of International Studies, 35, 19–32.
  • M.Rhodes-Kropf,, & S.Viswanathan, (2004). Market valuation and merger waves. TheJournal of Finance, 59, 2685–2718. doi:10.1111/jofi.2004.59.issue-6
  • S.Rossi,, & P.F.Volpin, (2004). Cross-country determinants of mergers and acquisitions. Journal of Financial Economics, 74, 277–304. doi:10.1016/j.jfineco.2003.10.001
  • A.Shleifer,, & R.Vishny, (2003). Stock market driven acquisitions. Journal of Financial Economics, 70, 295–311. doi:10.1016/S0304-405X(03)00211-3
  • N.G.Travlos, (1987). Corporate takeover bids, methods of payment, and bidding firms’ stock returns. TheJournal of Finance, 42, 943–963. doi:10.1111/j.1540-6261.1987.tb03921.x
  • P.Zhang, (2001). What really determines the payment methods in M&A deals (Working Paper No. 2001-0103). Manchester: Manchester School of Management.
Fuente de los datos: Dialnet