Title: Analysing the impact of financial constraints and group affiliation on mode of payment and announcement returns of the Indian acquiring companies

Authors: Harshika Jain; Reena Nayyar

Addresses: International Management Institute New Delhi, B 10, Tara Crescent, Block B, Qutab Institutional Area, Delhi 110016, New Delhi, India ' International Management Institute New Delhi, B 10, Tara Crescent, Block B, Qutab Institutional Area, Delhi 110016, New Delhi, India

Abstract: This study aims at assessing the impact of financial constraints on mode of payment employed and announcement returns of the acquiring companies in India. Further, the study also aims at analysing the combined impact of financial constraints and group affiliation on the mode of payment and announcement returns of the acquiring companies. It is found that the likelihood of stock financing on the part of acquiring companies increases with the increase in the financial constraints and the market reacts positively to such stock funded acquisitions. Thus, the study is able to validate the opportunity cost of capital theory. However, the financial advantage theory with respect to the mode of funding employed by group affiliated financially constrained acquiring companies cannot be substantiated by the results of the study.

Keywords: mergers; acquisitions; financial constraints; group affiliated; mode of payment; event study; announcement returns; India.

DOI: 10.1504/GBER.2023.134363

Global Business and Economics Review, 2023 Vol.29 No.4, pp.429 - 451

Received: 14 Dec 2021
Accepted: 20 Jul 2022
Published online: 19 Oct 2023 *

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