Corporate Takeover Bids, Methods of Payment, and Bidding Firms Stock Returns: The Effects of Leverage

Document Type



Published by Creighton University, College of Business in the Quarterly Journal of Business and Economics, volume 30 issue 3, 1991. Bryant users may access this article here.


Creighton University, College of Business


Recent research examining the role of the method of payment in explaining common stock returns of bidding firms at the announcement of takeover bids shows significant differences between the abnormal returns in cash and stock transactions. These differences may reflect differences in changes in leverage in addition to, or perhaps rather than, differences in method of payment. This study tests for a leverage effect while controlling for the method of payment. The results indicate a strong leverage impact on the abnormal returns to acquiring firms' shareholders in addition to the method of payment effect.