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The Method of Payment in Corporate Acquisitions, Investment Opportunities, and Management Ownership
Author(s) -
MARTIN KENNETH J.
Publication year - 1996
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.1996.tb04068.x
Subject(s) - business , stock (firearms) , payment , cash , corporate finance , tender offer , finance , monetary economics , financial system , corporate governance , economics , shareholder , mechanical engineering , engineering
This article examines the motives underlying the payment method in corporate acquisitions. The findings support the notion that the higher the acquirer's growth opportunities, the more likely the acquirer is to use stock to finance an acquisition. Acquirer managerial ownership is not related to the probability of stock financing over small and large ranges of ownership, but is negatively related over a middle range. In addition, the likelihood of stock financing increases with higher pre‐acquisition market and acquiring firm stock returns. It decreases with an acquirer's higher cash availability, higher institutional shareholdings and blockholdings, and in tender offers.