The source of financing in mergers and acquisitions

Fischer, Mario

doi:10.1016/j.qref.2017.01.003

Cited by 28 publications

(31 citation statements)

References 68 publications

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“…Based on signaling theory and the free cash flow hypothesis, Martynova and Renneboog (2009) [13] show that debt financing can enhance the market value of acquirers in Europe. Instead, Fischer (2017) [14] show that debt-financed M&A underperform relative to equity-financed M&A. However, these theories explain and support the findings only partially, owing to the unique institutional environment and regulatory requirements in China.…”

Section: Introductionmentioning

confidence: 79%

“…Equity financing, in contrast, can convey information that the stock price of a firm is overvalued to the market, resulting in weaker market performance following M&A [8,25], or create value for long-term shareholders [27]. Fischer (2017) [14] shows that debt-financed M&A underperform relative to equity-financed M&A. Based on signaling theory and the free cash flow hypothesis, Barron et al (2008) [28] assert that equity-financed M&A signal to the market that the cumulative net present value of investment projects exceeds zero, thus improving performance, while debt financing has no significant impact on M&A performance.…”

Section: Equity-financed and Debt-financed Manda Deals In Western Countmentioning

confidence: 99%

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Does M&A Financing Affect Firm Performance under Different Ownership Types?

et al. 2020

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Mergers and acquisitions (M&A) are an essential way for enterprises to achieve sustainable development. As large sums of money are typically involved in M&A transactions, financing is a vital factor in outcomes. This study examines the relation between equity and debt financing of M&A on subsequent performance, and the effect of ownership (state-owned enterprises versus private-owned enterprises) on M&A performance in China. We are motivated to examine the relation between financing methods and M&A performance in China because the differences in ownership, resource availability and policy support by the government for many firms may affect subsequent performance. Using a large sample of Chinese A-share listed companies between 2009 and 2016, we find that equity-financed M&A transactions lead to significantly better performance than debt-financed transactions. Equity-financed M&A transactions of state-owned enterprises (SOEs) perform significantly better as compared to debt-financed M&A, whereas equity-financed M&A transactions of private-owned enterprises (POEs) have little effect on their performance. This study extends our insights into the relation between M&A financing types and firm performance under different ownership types in the context of emerging markets.

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Section: Introductionmentioning

confidence: 79%

Section: Equity-financed and Debt-financed Manda Deals In Western Countmentioning

confidence: 99%

Does M&A Financing Affect Firm Performance under Different Ownership Types?

et al. 2020

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“…With regard to two types of funding sources, a company will determine the type of funding action in the M&A based on the main funding factors, namely the availability of internal cash (cash holding) after deducting the operational funding allocation of the company, so as not to disrupt the company's operational funding activities. Thus, funding methods can have a direct impact on or be influenced by the company's decision to choose the right method of payment, because it affects the availability of cash holding to be used by the company and the target leverage set by the company in its capital structure [4]. In the ASEAN countries performing M&As in 2007 to 2017, most tended to use internal funding, which involves cash financing and an optimal combination of funding with a cash element, rather than choosing non-cash financing (like a debt and equity combination).…”

Section: Table III Model 2 Resultsmentioning

confidence: 99%

“…Fischer [4] examined a sample of 610 acquisitions over period 1991 to 2009. They distinguished several different sources of financing for sizable transactions.…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

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Does corporate liquidity affect the M&A decisions and methods of payment? Evidence in ASEAN listed firms

Tanudjaja¹,

Anas²

2019

Proceedings of the 3rd Asia-Pacific Research in Social Sciences and Humanities Universitas Indonesia Conference (APRISH 2018)

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Using a probit model and data of 743 merger and acquisition deals of ASEAN listed firms over the period 2007 to 2017; this research studies the extent that liquidity impacts firms' cash capacity in corporate investing decisions. We examine whether high liquidity firms decide to join a merger and acquisition's bidding process and whether it affects their choice of payment method. We observe that high liquidity firms have managed their excess cash well through investments, and the probability of being M&A bidders is high. We found that high growth firms are likely to use cash payments in acquisitions. This more strongly affects financially constrained bidders, who face greater opportunity costs in holding cash.

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Does Fintech merger and acquisition change a firm's financial statement?

Wang

2024

J Corp Accounting Finance

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Through a comprehensive analysis of United States public firms, we explore the implications of mergers and acquisitions within the Financial Technology (Fintech) sector on a company's value and capital structure. The financial statements of financial institutions engaged in Fintech mergers and acquisitions differ significantly from those of other nonfinancial institutions involved in various high‐technology acquisitions. Our results indicate that when a financial company acquires a Fintech firm, it enhances the acquirer's overall firm value and cash holdings. Furthermore, these mergers and acquisitions within the high‐technology sector exert distinct influences on a company's leverage and cash flow.

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The source of financing in mergers and acquisitions

Cited by 28 publications

References 68 publications

Does M&A Financing Affect Firm Performance under Different Ownership Types?

Does M&A Financing Affect Firm Performance under Different Ownership Types?

Does corporate liquidity affect the M&A decisions and methods of payment? Evidence in ASEAN listed firms

Does Fintech merger and acquisition change a firm's financial statement?

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