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Finance and Banking Conference for helpful comments. We especially want to thank an anonymous referee for his insightful comments and suggestions. 1The choice of payment method in European mergers & acquisitions We study the payment choices by European bidders in 3,667 mergers and acquisitions (M&A) of publicly and privately held targets over the period 1997-2000. Europe is an ideal venue for studying the importance of corporate governance in making M&A payment choices, given the large number of closely held firms. Furthermore, our dataset encompasses a wide range of institutional settings and legal and regulatory rules which can impact M&A payment choices. We specify and test a model of the M&A payment choice with panel data. The trade off between corporate governance concerns and debt financing constraints is found to have a large bearing on the bidder’s payment choice. Consistent with earlier evidence, we find that several deal and target characteristics significantly affect the choice of M&A payment method. Global M&A activity has grown dramatically over the last ten years, bringing with it majo