Cash windfalls and acquisitions

• 成果类型: Article
• 署名作者: von Beschwitz, Bastian
• 署名单位: Federal Reserve System - USA; Federal Reserve System Board of Governors
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2018.02.009
• 发表日期: 2018
• 页码: 287-319
• 关键词: acquisitions; Free cash flow theory; overinvestment

摘要

This article studies the effect of cash windfalls on the acquisition policy of companies. As identification, I use a German tax reform that permitted firms to sell their equity stakes tax free. Companies that could realize a cash windfall by selling equity stakes see an increase in the probability of acquiring another company by 14%. I find that these additional acquisitions destroy firm value. Following the tax reform, affected firms experience a decrease of 1.2 percentage points in acquisition announcement returns. These effects are stronger for larger cash windfalls. My findings are consistent with the free cash flow theory. Published by Elsevier B.V.