Corporate Cash Reserves and Acquisitions

  title={Corporate Cash Reserves and Acquisitions},
  author={J. Harford},
  journal={Journal of Finance},
  • J. Harford
  • Published 1997
  • Economics, Business
  • Journal of Finance
  • The acquisition behavior of cash-rich firms is examined for evidence of free cash flow-related behavior. A model of cash management is developed and used to identify a sample of cash-rich firms. The model provides a benchmark "normal" level of cash reserves based on industry characteristics and dynamic cash management over time. Cash-rich firms are found to be more likely to begin acquisitions, increase current acquisition spending, and engage in large acquisitions than the rest of the… CONTINUE READING
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