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Full Stock Payment Marginalization in M&A Transactions

de Bodt, Eric and Cousin, Jean-Gabriel and Roll, Richard (2016) Full Stock Payment Marginalization in M&A Transactions. Social Science Working Paper, 1417. California Institute of Technology , Pasadena, CA. (Unpublished) http://resolver.caltech.edu/CaltechAUTHORS:20170726-084800488

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Abstract

The number of merger and acquisition (M&A) transactions paid fully in stock in the U.S. market declined sharply after 2001, when pooling and goodwill amortization were abolished by the Financial Accounting Standards Board. Did this accounting rule change really have such far-reaching implications? Using a differences-in-differences test and Canada as a counterfactual, this study reveals that it did. We also report several other results confirming the role of pooling abolishment, including (i) that the decrease in full stock payment relates to CEO incentives and (ii) that previously documented determinants of the M&A mode of payment cannot explain the post pooling abolishment pattern. These results are also robust to controls for various factors, such as the Internet bubble, the exclusion of cross-border deals, the presence of Canadian cross-listed firms, the use of a constant sample of acquirers across the pooling and post pooling abolishment periods, the use of Europe as an alternative counterfactual, and controls for the SEC Rule 10b-18 share repurchase safe harbor amendments of 2003.


Item Type:Report or Paper (Working Paper)
Additional Information:The authors thank Cécile Carpentier (Laval), Espen Eckbo (Dartmouth College), Jean-Marc Suret (Laval), Karin Thorburn (NHH), and participants in the ECCCS Monday Finance and NHH Brown Bag seminars for their useful comments. The authors are also extremely grateful to anonymous referees who provided many suggestions and insights.
Group:Social Science Working Papers
Subject Keywords:mergers and acquisitions; method of payment, pooling of interest, purchase
Classification Code:JEL: G34
Record Number:CaltechAUTHORS:20170726-084800488
Persistent URL:http://resolver.caltech.edu/CaltechAUTHORS:20170726-084800488
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:79391
Collection:CaltechAUTHORS
Deposited By: Hanna Storlie
Deposited On:07 Aug 2017 21:36
Last Modified:07 Aug 2017 21:36

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