The Full Stock Payment Marginalization in M&A Transactions

49 Pages Posted: 14 Nov 2015 Last revised: 15 Nov 2015

See all articles by Eric de Bodt

Eric de Bodt


Jean-Gabriel Cousin

Univ. Lille, ULR 4112 - LSMRC

Richard Roll

California Institute of Technology

Date Written: November 12, 2015


The analysis of US M&A transactions through the last decades reveals a striking and sharp declining in the percentage of transactions fully paid in stock since 2001, the year of pooling and goodwill amortization abolishment (SFAS 141 and 142). Can accounting rule changes have had such far reaching implications? Our results clearly support this hypothesis: (i) our differences-in-differences tests reveal a statistically and economically significant drop in the number of transactions fully paid in stock in the US after 2001 using Canada as counterfactual, (ii) the decrease in the probability to pay fully in stock is related to CEO incentives, (iii) classic determinants of the M&A mode of payment are unable to explain the post pooling abolishment evolution, (iv) acquisitions more likely to be accounted under pooling are less frequently fully paid in stock after pooling abolishment and (v) acquisitions of public targets fully paid in stock have been significantly more negatively perceived by investors after pooling abolishment. Our results are moreover robust to controlling for the internet bubble burst, the exclusion of cross-border deals, the presence of Canadian cross-listed firms, the use of a constant sample of acquirers across the pooling and post pooling abolishment periods, the use of Europe in place of Canada as counterfactual and an alternative treatment effect test.

Keywords: mergers and acquisitions, method of payment, pooling of interest, purchase

JEL Classification: G34

Suggested Citation

de Bodt, Eric and Cousin, Jean-Gabriel and Roll, Richard W., The Full Stock Payment Marginalization in M&A Transactions (November 12, 2015). Available at SSRN: or

Eric De Bodt (Contact Author)

NHH-Caltech ( email )

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Jean-Gabriel Cousin

Univ. Lille, ULR 4112 - LSMRC ( email )

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Richard W. Roll

California Institute of Technology ( email )

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