High Information Asymmetry and the Effect of Stock Payment: a Study of Shareholder Value Creation in Cross-border M&As in the US and BRIC Markets

Student: Kolmykova Tatiana

Educational Programme: Financial Markets and Financial Institutions (Master)

Year of Graduation: 2018

Based on the empirical analysis using samples of 713 and 468 cross-border M&As deals initiated by the US and BRIC companies during 2002–2017, we find that stock payment in cross-border M&As has a destructive effect on shareholder value which can be the result of the negative signalling effect. We further show that the negative effect is moderated if a) a target company is high-technological b) the cultural distance between the acquiring and acquired firm countries is larger. For the BRIC companies we also find the moderating effect of the lower target country political stability. These results are in line with a sharing-risk argument, which implies that stock payment can be beneficial in M&As with particularly large information asymmetry.

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