Impact of stock payment on M&A performance in high information asymmetry
https://doi.org/10.38050/01300105202033
Abstract
The choice of stock as a method of payment in M&A deals is usually considered by researchers as a signal of acquirer’s stock overvaluation that is proved by its negative impact on M&A performance. However, this view doesn’t take into account information asymmetry faced by the acquirer. The choice of stock payment may be used by the acquirer as a mechanism to reduce risks caused by information asymmetry, and thereby send a positive signal to the market. In this paper, drawing on evidence from 713 and 468 cross-border M&As, initiated by companies from US and BRIC respectively, over 2002-2017, we show that stock payment may be beneficial when target firm is a high-tech company and when the cultural distance between acquirers and targets is large. For M&As, initiated by US firms, stock payment may be also beneficial in deals with private targets, and for acquirers from BRIC — in deals with targets located in a weaker political environment.
About the Authors
S. A. Grigorieva
NRU Higher School of Economics
Russian Federation
Russian Federation
Moscow
T. V. Kolmykova
NRU Higher School of Economics
Russian Federation
Russian Federation
Moscow
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Review
For citations:
Grigorieva S.A., Kolmykova T.V. Impact of stock payment on M&A performance in high information asymmetry. Moscow University Economics Bulletin. 2020;(3):58-77. (In Russ.) https://doi.org/10.38050/01300105202033
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