Corporate Cash Reserves and Acquisitions
Jarrad Harford ()
Journal of Finance, 1999, vol. 54, issue 6, pages 1969-1997
Cash-rich firms are more likely than other firms to attempt acquisitions. Stock return evidence shows that acquisitions by cash-rich firms are value decreasing. Cash-rich bidders destroy seven cents in value for every excess dollar of cash reserves held. Cash-rich firms are more likely to make diversifying acquisitions and their targets are less likely to attract other bidders. Consistent with the stock return evidence, mergers in which the bidder is cash-rich are followed by abnormal declines in operating performance. Overall, the evidence supports the agency costs of free cash flow explanation for acquisitions by cash-rich firms. Copyright The American Finance Association 1999.
References: Add references at CitEc
Citations View citations in EconPapers (194) Track citations by RSS feed
Downloads: (external link)
http://www.blackwell-synergy.com/servlet/useragent ... &year=1999&part=null link to full text (text/html)
Access to full text is restricted to subscribers.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: http://EconPapers.repec.org/RePEc:bla:jfinan:v:54:y:1999:i:6:p:1969-1997
Ordering information: This journal article can be ordered from
Access Statistics for this article
More articles in Journal of Finance from American Finance Association Contact information at EDIRC.
Series data maintained by Wiley-Blackwell Digital Licensing ().