The Method of Payment in Corporate Acquisitions, Investment Opportunities, and Management Ownership

J. OF FINANCE, Vol. 51 No. 4, September 1996

Posted: 2 Sep 1996

See all articles by Kenneth J. Martin

Kenneth J. Martin

New Mexico State University - Department of Finance & Business Law

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Abstract

This paper 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.

JEL Classification: G32, G34

Suggested Citation

Martin, Kenneth J., The Method of Payment in Corporate Acquisitions, Investment Opportunities, and Management Ownership. J. OF FINANCE, Vol. 51 No. 4, September 1996, Available at SSRN: https://ssrn.com/abstract=7696

Kenneth J. Martin (Contact Author)

New Mexico State University - Department of Finance & Business Law ( email )

College of Business Administration & Economics
Las Cruces, NM 88003
United States
505-646-3201 (Phone)
505-646-2820 (Fax)

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