This study examines the financing source for cross-border M&A activities and its determinants including financial market development, legal environment, ownership structure, and other firm-specific characteristics in nine East Asian countries during the period of 1998 to 2006. Through the method of logistic regression, our findings indicate that managers’ preferences for financing sources are sensitive to the internal corporate governance. First, firms with higher ownership concentration are more likely to finance with non-bank private debts. Second, family-controlled business use partially internal capital and bank loans. Third, firms with bank interlocking directorship will have more likelihood to finance with bank loans. We also identified other firm-specific characteristics that affect managers’ financing choice. Consistent with earlier evidence, firms with higher growth opportunity, better stock performance, and in large size are more likely to finance with public equity. In addition, we find firms in less-developed stock market will finance with non-bank private debt. The results for legal environment provide us different evidence for financing choices. That is, Firms in better protection of minority shareholders finance transaction with equity (especially with private equity). Firms in countries with common law origin, however, will be more likely to use internal funds.

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