The determinants of the method of payment in corporate takeovers

Abstract

This study examines the determinants which significantly affect the choice of payment method in Greek mergers and acquisitions. Using a sample of 321 deals, separated into stock and cash financed deals, and including a binary Probit model we reached the following results. When bidder and target are not in the same country, the probability of cash financing increases. Also the probability increases when the target is a subsidiary firm. Finally looking at the bidder firm we find that debt capacity, financial leverage and cash availability could significantly affect the method of payment. An increase in debt capacity of the bidder firm or an increase in financial leverage causes a decrease in the probability of cash financing and subsequently increases the probability of stock financing. While an increase in cash availability of the bidder firm increases the probability of cash financing.