Kishore Vattikoti

ABSTRACT

We contend that the payment method employed in cross-border mergers and acquisitions (M&As) can help mitigate governance risks at the country level for the acquiring company. Our research reveals a higher inclination to use stocks as the payment method in cross-border transactions involving targets from countries with substantial governance risks compared to the acquirer's home country. This increased reliance on stocks in riskier cross-border deals reflects the acquirer's strategic response to prevent overpayment. However, it's noteworthy that using stocks instead of cash in cross-border deals is linked to a reduced likelihood of deal completion, as our study indicates. Moreover, in more recent periods, specifically after 2000, we observe a significant rise in the use of stocks and a corresponding decline in the use of cash in cross border deals. This trend has led to a convergence with the payment methods employed in domestic deals.