Get access

The Choice of Payment Method in European Mergers and Acquisitions




    Search for more papers by this author
    • Owen Graduate School of Management, Vanderbilt University. We thank Utpal Bhattacharya, Harry DeAngelo, Tim Loughran, Rob Stambaugh (the editor), and especially an anonymous referee for his/her insightful comments and suggestions. We also want to thank seminar participants at the Melbourne Business School, University of Miami, University of New South Wales, University of Notre Dame, University of Pittsburgh, University of South Carolina, Vanderbilt University, and the 16th Australasian Finance and Banking Conference for helpful comments. We are also appreciative of research support from the Financial Markets Research Center at Vanderbilt University.


We study merger and acquisition (M&A) payment choices of European bidders for publicly and privately held targets in the 1997–2000 period. Europe is an ideal venue for studying the importance of corporate governance in making M&A payment choices, given the large number of closely held firms and the wide range of capital markets, institutional settings, laws, and regulations. The tradeoff between corporate governance concerns and debt financing constraints is found to have a large bearing on the bidder's payment choice. Consistent with earlier evidence, we find that several deal and target characteristics significantly affect the method of payment choice.