Method of Payment in Mergers and Acquisitions: The Case of Saudi Arabia

Abstract

This study examines the long-run share performance of acquirer’ companies listed on the Saudi Arabia Stock Exchange (Tadawul) from 1st January 2000 to 31st August 2017. Using the buy-and-hold abnormal return method, the present study finds that the acquirer companies’ shares for the cash payment method continues to outperform their counterparts of non-cash payment against the equal- weighted and value-weighted indexes. The presence of abnormal return opportunities that may be exploited by investors in the three-year holding period following the completion of M&A events might provide valuable insight to individual and institutional investors. As there is no national evidence on share performances of acquirer’s companies over the long-run period, the present findings add to a growing body of M&A literature.

Keywords: Mergers, Acquisitions, Short-And-Long Run Performance, Saudi Arabia, Buy-And-Hold Abnormal Return, Market Adjusted Return, Market Efficiency, Equal-Weight, Value-Weight

JEL Classification: G34