Country uncertainty, power distance, and payment methods in acquisitions

Dang, M., Hoang, Viet Anh, Jones, Edward, Henry, Darren, Le, Phuong Uyen and Puwanenthiren, Premkanth 2021. Country uncertainty, power distance, and payment methods in acquisitions. The European Journal of Finance. Advanced online publication. https://doi.org/10.1080/1351847x.2021.1971731

TitleCountry uncertainty, power distance, and payment methods in acquisitions
TypeJournal article
AuthorsDang, M., Hoang, Viet Anh, Jones, Edward, Henry, Darren, Le, Phuong Uyen and Puwanenthiren, Premkanth
Abstract

This study examines the impact of country-specific uncertainty on the choice of payment method in international acquisitions. Our results show a negative correlation between the level of target country-specific uncertainty and cash transactions. Specifically, when the host country experiences a high level of country uncertainty, acquirers are more likely to choose non-cash transactions in which acquiring firms can issue their own equity to the target firm as part or all of the purchase consideration of the deal. The result is robust to alternative tests and analysis of subsamples. We also find that differences in uncertainty between host and home countries are informative in bidders’ payment decisions. Further, we find that the negative relation between target country-specific uncertainty and cash payment becomes weaker when there are larger differences in power distance between host and home countries. Our findings provide recommendations for policy-making bodies, and have implications for firm managers making corporate restructuring decisions.

KeywordsCountry uncertainty, acquisitions, payment methods, institutional environment, power distance
JournalThe European Journal of Finance
ISSN1351-847X
1466-4364
Year2021
PublisherTaylor & Francis
Publisher's version
License
CC BY-NC-ND 4.0
File Access Level
Open (open metadata and files)
Digital Object Identifier (DOI)https://doi.org/10.1080/1351847x.2021.1971731
Web address (URL)https://www.tandfonline.com/doi/full/10.1080/1351847X.2021.1971731
Publication dates
Published online06 Sep 2021
Licensehttp://creativecommons.org/licenses/by-nc-nd/4.0/
Page range1-30

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Permalink - https://westminsterresearch.westminster.ac.uk/item/v6x75/country-uncertainty-power-distance-and-payment-methods-in-acquisitions


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