Abstract
This study examines the relation between the change in operating performance of firms which merge and whether the acquiring firm offered cash or stock as the method-of-payment. We examine how operating performance changed for a sample of 413 combinations. The results indicate that the change in performance of the merged firms is significantly larger for cases in which the acquiring company offered cash as compared to stock offers. The results are not sensitive to whether the combination involved a tender offer or a negotiated merger, to offer size, industry relatedness between the bidder's and the target's businesses or bidder leverage.
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