Payment Method Signals in M&A: The Role of Corporate Governance in Acquirer Announcement Returns

Sammanfattning

This thesis examines whether corporate governance moderates the relationship betweenacquisition payment method and acquirer announcement returns. Drawing on signalling andagency theory, the study investigates whether board independence and CEO-chairman dualityaffect the market's reaction to cash- and equity-financed acquisitions among U.S. acquiringfirms. Using an event study of 4,694 U.S. acquisitions from 2010 to 2026, the findingsprovide strong support for H1a and H1b: equity-financed acquirers earn a mean five-dayCAR of −1.96 percent, compared to +0.23 percent for cash-financed acquirers, a difference of2.19 percentage points that remains statistically significant after controlling for firmcharacteristics, year effects, and industry effects. No support is found for H2a or H2b. Thisnull result is attributed partly to compressed governance variation in the post-Sarbanes-Oxleyenvironment, where board independence averages approximately 84 percent across thesample with limited cross-sectional variance. The findings confirm that the payment methodsignal documented by Travlos (1987) remains economically and statistically relevant inmodern U.S. capital markets, while suggesting that formal board characteristics may be toocoarse to detect governance moderation effects in a heavily regulated institutional setting.