Crossing Takeover Premiums and Mix of Payment: Empirical Test of Contractual Setting in M&A Transactions
49 Pages Posted: 11 Nov 2010 Last revised: 18 Jun 2015
There are 2 versions of this paper
Crossing Takeover Premiums and Mix of Payment: Empirical Test of Contractual Setting in M&A Transactions
Date Written: November 9, 2010
Abstract
The analysis of the offer premiums and of the means of payment should not be done separately. In the empirical literature these two variables are analyzed separately although they may have endogenous relation. Using a sample of European M&As over the 2000-2010 decade, we show that these two variables are jointly set up in a contractual approach. The relationship of the percentage of cash with the offer premium is positive: higher premiums will yield payment with more cash.
We highlight that the payment choice is not a continuum between full cash and full share payment. The existence of two regime of payment in M&A transactions is the first conclusion we draw. We analyze the determinants of M&A terms in a contractual approach where the offer premium and the means of payment are jointly set. The underlying rationale of asymmetry of information and risk sharing calculus is found significant.
Keywords: M&A, Takeover Premium, Means of Payment, Contract Setting
JEL Classification: G32, G34
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
New Evidence and Perspectives on Mergers
By Gregor Andrade, Mark L. Mitchell, ...
-
Do Managerial Objectives Drive Bad Acquisitions?
By Randall Morck, Andrei Shleifer, ...
-
Stock Market Driven Acquisitions
By Andrei Shleifer and Robert W. Vishny
-
Stock Market Driven Acquisitions
By Andrei Shleifer and Robert W. Vishny
-
Poison or Placebo? Evidence on the Deterrent and Wealth Effects of Modern Antitakeover Measures
By Robert Comment and G. William Schwert
-
Does Corporate Performance Improve after Mergers?
By Paul M. Healy, Krishna Palepu, ...
-
Managerial Performance, Tobin's Q, and the Gains from Successful Tender Offers
By Larry H.p. Lang, Ralph A. Walkling, ...