Publicação
The importance of cash holdings for acquiring companies in mergers and acquisitions
| Resumo: | Cash holdings can be an important vehicle for firms to undertake value increasing investment opportunities, but also a source of agency costs. Using a sample of Mergers and Acquisitions of bidders from several countries: Germany, France, UK and US, between 1990 and 2015, I find a positive relation between excess cash and M&A activity. The results also suggest that smaller firms, with higher investment opportunities and riskier cash-flows tend to hold more cash. Additionally, I do not find any short-term significant stock market reaction to cash-rich bidder acquisitions, despite abnormal declines in post-merger operating performance. Finally, cash-rich firms use their cash rather than stock to finance these investment decisions. |
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| Autores principais: | Castanho, João Bento Ramos |
| Assunto: | Cash Holding M&As Payment method Announcement returns Operating performance Agency costs Participações em dinheiro Fusões e aquisições Método de pagamento Retorno de anúncios Desempenho operacional Custos de agência Ciências Sociais::Economia e Gestão |
| Ano: | 2017 |
| País: | Portugal |
| Tipo de documento: | dissertação de mestrado |
| Tipo de acesso: | acesso aberto |
| Instituição associada: | Universidade do Minho |
| Idioma: | inglês |
| Origem: | RepositóriUM - Universidade do Minho |
| Resumo: | Cash holdings can be an important vehicle for firms to undertake value increasing investment opportunities, but also a source of agency costs. Using a sample of Mergers and Acquisitions of bidders from several countries: Germany, France, UK and US, between 1990 and 2015, I find a positive relation between excess cash and M&A activity. The results also suggest that smaller firms, with higher investment opportunities and riskier cash-flows tend to hold more cash. Additionally, I do not find any short-term significant stock market reaction to cash-rich bidder acquisitions, despite abnormal declines in post-merger operating performance. Finally, cash-rich firms use their cash rather than stock to finance these investment decisions. |
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