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Corporate takeovers in Malaysia: The determinants of financing decision

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In this article we examine the role of potential factors influencing the choice of payment method in takeover transactions of Malaysian acquirers. We document that the financial leverage, the size of acquiring firms, the relative size of the transactions to acquiring firms, and the high technology status of the targets are key. | 38 Cao Dinh Kien et. al./ Journal of Economic Development 23(2) 38-60 Corporate Takeovers in Malaysia: The Determinants of Financing Decision CAO DINH KIEN Foreign Trade University (Hanoi campus) – caokien@ftu.edu.vn NGUYEN THU THUY Foreign Trade University (Hanoi campus) – thuy.nt@ftu.edu.vn NGO THI THU HA Foreign Trade University (Hanoi campus) – ngothithuha021993@gmail.com This research was supported and funded by Vietnam’s National Foundation for Science and Technology Development (NAFOSTED) under grant number II3.1-2013.28. ARTICLE INFO ABSTRACT Article history: In this article we examine the role of potential factors influencing the choice of payment method in takeover transactions of Malaysian acquirers. We document that the financial leverage, the size of acquiring firms, the relative size of the transactions to acquiring firms, and the high technology status of the targets are key determinants to explain the methods of payment in their transactions. Moreover, the acquirers are found to be able to use equity to finance their foreign M&A transactions during the credit constraint periods. Received: Aug. 6 2015 Received in revised form: Oct. 9 2015 Accepted: Mar. 25 2016 Keywords: Mergers, acquisitions, method of payment, financing decision, Malaysia. Cao Dinh Kien et. al. / Journal of Economic Development 23(2) 38-60 39 1. Introduction Mergers and acquisitions (M&As) have become a remarkable business phenomenon around the globe. As one of the viable turnaround options for restoring health of distressed companies which should be seen as a means for their survival and growth in the 21st century, they are popularly employed by investors especially in the advanced economies of the world to engender large and financially viable companies, which in turn facilitate the rapid growth and development of the economies. On the other hand, they are also adopted by investors in developing countries, where today’s unfolding scenario requires the pooling together