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Published February 2018 | public
Journal Article

Full-Stock-Payment Marginalization in Merger and Acquisition Transactions


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 difference-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.

Additional Information

© 2017 INFORMS. Received: December 17, 2015; Accepted: July 15, 2016; Published Online: March 3, 2017. The authors thank Helen Bollaert (SKEMA Business School), Cécile Carpentier (Université Laval), Espen Eckbo (Dartmouth College), Michel Levasseur (Université Lille), Frédéric Lobez (Université Lille), Jean-Christophe Statnik (Université Lille), Jean-Marc Suret (Université Laval), Armin Schwienbacher (SKEMA Business School), Karin Thorburn (Norwegian School of Economics (NHH)), and participants in the ECGC (European Center for Governance and Control Studies) 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. The authors acknowledge financial support from the ECGC (European Center for Governance and Control Studies) of Université Lille and SKEMA Business School. E. de Bodt is a visiting associate in finance at the California Institute of Technology.

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