THE RELATIONSHIP BETWEEN CAPITAL GAINS AND THE CHOICES OF PAYMENT METHOD IN MERGER AND ACQUISITION BEFORE AND AFTER ADOPTION OF ROYAL DECREE ISSUED NO.542 B.E. 2555

Abstract

This study investigates the relationship between capital gains and the choices of payment method in merger and acquisition before and after adoption of Royal Decree issued no.542 B.E. 2555, the law on corporate income tax exempt for a merger with share swap. The population of this study included the companies listed on the Stock Exchange of Thailand (SET) that made the tender offer during B.E. 2549 and B.E. 2558, period of 10 years include 6 years prior the law adoption, the year the law adoption and 3 years after the law adoption. Based on the database of SEC, there are 148 companies making the tender offers over the 10 years period; however, 28 companies are needed to be removed from the study due to their purposes of merger and acquisition, resulting in 120 companies in total. The statistics used in the study consisted of Descriptive Statistical Analysis, Binary Logistic Regression Analysis in order to investigate the relationship between capital gain and the choices of payment method in merger and acquisition before and after a law adoption, and Mann-Whitney U Test which is Non-parametric Test in order to differentiate the capital gains before and after the law adoption on a merger and acquisition for each payment method. The results from Logistic Regression Analysis indicate that there is no relationship between capital gain and the choices of payment method on a merger and acquisition before and after the law adoption; however, it is found that Market-to-Book ratio positively correlated with share payment method at the statistical significance level of 0.10. Moreover, the study conducts Robustness Test by cutting the sample in the grey period of one year before the law adoption. The results confirm the original findings. The findings from Mann-Whitney U Test identify the difference of capital gain between before and after the law adoption at the statistical significance level of 0.10 for share payment method.