In Cash We Trust, but is Cash King? Payment Method Choice and Abnormal Acquirer Returns in Nordic M&A Deals

Sammanfattning

We examine the method-of-payment effect on acquirer announcement-period abnormal returns in the four main Nordic M&A markets, filling a geographic gap in the empirical literature. Despite the volume and economic relevance of Nordic deal activity, large sample evidence on the cash-stock differential outside Anglo-American markets remains sparse, and the institutional features of the Nordic setting make the external validity of the established benchmarks open for questioning. Drawing on the adverse selection framework, we test whether stock-financed acquirers earn lower announcement-period cumulative abnormal returns than cash-financed acquirers, and that this differential is amplified in proportionally larger transactions. Using data of deals announced between 2006 - 2025 in Denmark, Finland, Norway, and Sweden, we estimate 5-day CARs around the announcement date and run univariate tests and multivariate regressions testing the cash-stock differential. Both hypotheses are directionally supported, although the main specifications are not formally established at conventional significance levels, and we document heterogeneity across the four markets.