The purpose of this paper is to investigate the payment of percentage cash from total payment in a REITs mergers and acquisitions (M&A) transaction.
This study applies a heteroskedastic‐consistent regression model to analyze the relationship between the percentage of cash paid during M&A transactions and other determinants such as sources of funds, geographical proximity and percentage sought by acquirer.
The results of empirical analysis show that REITs with internal corporate funds tend to pay larger percentage of cash versus other forms of payments within M&A deals. Moreover, geographical proximity and intra‐industry REITs M&A has no significant effect on the form of payment. And finally, the larger the percentage sought by the acquirer, the less percentage of cash paid in a REITs M&A deal.
The paper mainly shows that internal funding is a significant factor in determining the percentage of cash versus stocks (or any other form of payment) when completing a merger. This highlights the importance of a REIT to manage its short‐term liquidity and cash specifically. Also, this shows the applicability of pecking order theory on the REITs industry.
The paper researches the cash as a method of payment in REITs M&A, an industry with its specific characteristics.
