Methods of Payments and Cross-Border Acquiring firm Valuation

Consistent with the existing literature in U.S. domestic M&As, the methods of payment also seem to convey information about acquiring firm valuation in cross-border acquisitions. Cash-financing is associated with positive wealth gain upon foreign M&A announcements while equity-financing results in insignificant shareholder wealth increase. The fact that equity-financing does not lead to value loss as found in most domestic M&A studies seems to suggest additional wealth effect components associated with international diversification. After controlling for payment methods, the wealth effect determinants of U.S. acquirers in international M&As remain to be internationalization, location, and corporate governance factors. A missing piece in the existing literature of cross-border acquiring firm value gain and a critical complement to the documented determinants in explaining acquiring firm wealth effect appears to be the medium of exchange.