What motivates REITs to pay cash versus other forms of payment in mergers and acquisitions?

Purpose: 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. Design/methodology/approach: 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. Findings: 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. Practical implications: 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. Originality/value: The paper researches the cash as a method of payment in REITs M&A, an industry with its specific characteristics.