What Determines The Choice of Payment Method? Evidence from Turkish Mergers and Acquisitions

Özet

Purpose – Due to the increasing competition conditions, companies resort to mergers and acquisitions (M&A) as a method of external growth. When firms engage in M&A, payment method choice becomes a crucial aspect of the transaction. This study investigates the determining factors of M&A payment methods within the Turkish capital markets, i.e. Borsa Istanbul. This study examines M&A transactions involving Turkish companies between 2011 and 2020, aiming to identify prevailing trends over a 10-year period. The analysis deliberately excludes the impacts of the post-COVID-19 period to ensure that the findings reflect the dynamics of a relatively stable economic environment, unaffected by the extraordinary circumstances of the pandemic. Design/methodology/approach – This study employs a backward stepwise binary logistic regression model to analyze the determinants of payment method choices in mergers and acquisitions (M&A) transactions. The analysis is based on a dataset of 58 transactions involving Turkish companies, obtained from the Eikon Refinitiv database. The model examines the influence of key variables, including managerial ownership, financial leverage, cash holdings, and the market-to-book ratio, to identify the factors driving the choice between cash and stock as payment methods in M&A transactions. Findings – The empirical analysis reveals that listed target companies show a strong preference for stock payments in mergers and acquisitions (M&A) transactions. In contrast, variables such as intra-industry transactions and relative deal size are found to have no statistically significant impact on the choice of payment method. These results highlight the differing roles that target characteristics and transaction-specific factors play in influencing payment method decisions. Discussion – The findings highlight the role of target firm characteristics, especially the listing status, in determining the choice of payment method in mergers and acquisitions (M&A). The preference for stock payments by listed targets suggests that such firms may leverage their public status to facilitate equity-based transactions, potentially due to advantages such as reduced liquidity constraints or signaling effects to the market. Additionally, the absence of significant influence from intra-industry transactions and relative deal size indicates that other factors, such as ownership structure or financial conditions, may play a more prominent role in shaping payment method decisions. These insights contribute to a deeper understanding of M&A financing strategies in the Turkish market, offering valuable implications for policymakers and practitioners aiming to optimize transaction outcomes.