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Though cross-border acquisitions have grown dramatically in value and frequency in the last ten years, little is known about returns to acquirers or their method-of-payment choice. This paper studies returns to U.S. bidders and their method-of-payment choice for acquisitions of foreign targets. Results indicate that bidder returns are higher for cash offers, for offers to private and subsidiary targets, if there is high insider ownership, and if there is high exchange rate variation. The method-of-payment choice for these bidders is linked to the target country’s legal regime and accounting standards, insider ownership, target type, and value uncertainty.

Introduction Today we find ourselves at a rather curious historical juncture. World poverty is more of a problem today than it was three decades ago. North‐south relations are more disharmonious than ever and, as a result, the development of the south is more urgent than ever. Yet, at the same time, the main tool of modern social science to tackle this problem, development economics, has turned out to be rather ineffective, throwing thereby the entire field into a deep crisis. It is not much of an exaggeration to claim that development economics as traditionally conceived is so seriously ill that it is not clear whether there is any life left. A leading scholar of the discipline, Alfred Hirschman, has found it necessary to write an essay that sounds more like an obituary than anything else (Hirschman, 1986). The basic tasks that now remain are to assess what went wrong and to explore new directions.