The method of payment choice in merger and acquisition (M&A) transactions has been the subject of much research in the finance literature. But significant changes in the economic environment of acquirers in the U.S. call into question whether known stylized facts are still valid and motivate us to undertake new empirical analyses. Using a large sample of M&A transactions spanning the last two decades, we investigate the financial constraints versus ownership dilution tradeoff that potentially drives negotiations about the method of payment (i.e., stock or cash), controlling for an extensive list of other potential determinants. The main takeaway from our analyses is that financial constraints are a dominant factor motivating acquirers to include stock (at least partially) in the method of payment package in M&A transactions in the recent period.

Economic, political, and public policy uncertainty affect merger and acquisition (M&A) activity. In this paper, we use Department of Justice (DOJ) and Federal Trade Commission (FTC) interventions in the M&A market to investigate whether regulatory interventions also matter. Our results support this conjecture. Using the Hoberg and Phillips (2010) similarity scores to identify product market competitors, we confirm a clear and significant DOJ/FTC regulatory enforcements' deterrence effect on future M&A transaction activity, a result robust to many alternative specifications. Additional evidence indicates that this deterrence effect is (at least partly) driven by both regulatory outcome uncertainty and regulatory intervention probability channels. Our results identify an (un)intended consequence of antitrust regulation that affects M&A activity.

On February 1, 2008, Microsoft offered $43.7billion for Yahoo. This offer was a milestone in the battle between Microsoft and Google to control the Internet search industry. The announcement accompanied a substantial decrease in Microsoft's stock price. Investors apparently considered the bid too high and doubted Microsoft's ability to create value with Yahoo's assets (the announcement combined returns implied a total value destruction of $13.29billion). Using the abnormal returns pattern of industry firms and customers, this article examines the sources of overbidding. Our analyses indicate that Microsoft's aggressive move is rooted in its rivalry with Google, but the personality traits of the involved CEOs might explain also a portion of the overbidding.

Recent academic studies indicate that acquirers' cumulative abnormal returns (CAR) decline from deal to deal in acquisition programs. Does this pattern suggest hubristic CEO behaviors are significant enough to influence average CAR patterns during acquisition programs? An alternative explanation is CEO learning. This study therefore tests for learning using successive acquisitions of large U.S. public targets undertaken by U.S. acquirers. A dynamic framework reveals that both rational and hubristic CEOs take on average investor reactions to their previous deals into account and adjust their bidding behavior accordingly. These results are consistent with a learning hypothesis.

Recent empirical research has shown that, from deal to deal, serial acquirers' cumulative abnormal returns (CAR) are declining. This has been most often attributed to CEOs hubris. We question this interpretation. Our theoretical analysis shows that (i) a declining CAR from deal to deal is not sufficient to reveal the presence of hubris, (ii) if CEOs are learning, economically motivated and rational, a declining CAR from deal to deal should be observed, (iii) predictions can be derived about the impact of learning and hubris on the time between successive deals and, finally, (iv) predictions about the CAR and about the time between successive deal trends lead to testable empirical hypotheses.

Event studies are an important tool for empirical research in Finance. Since the seminal contribution of Fama et al. [Fama, E., Fisher, L., Jensen, M., Roll, R., 1969. The adjustment of stock prices to new information. International Economic Review 10, 1–21], there have been many enhancements to the classical test methodology. Somewhat surprisingly, the estimation period has attracted less interest. It is usually routinely determined as a fixed window prior to the event announcement day. In this study, we propose a test that reduces the impact of potentially unrelated events during the estimation period. Our proposition is based on a two-state version of the classical market model as a return-generating process. We present standard specification and power analyses. The results highlight the importance of explicitly controlling for unrelated events occurring during the estimation window, especially in the presence of event-induced increase in return volatility.