Do Acquisitions Relieve Target Firms' Financial Constraints?

  title={Do Acquisitions Relieve Target Firms' Financial Constraints?},
  author={Isil Erel and Yeejin Jang and Michael S. Weisbach},
  journal={SPGMI: Compustat Fundamentals (Topic)},
type="main"> Managers often claim that target firms are financially constrained prior to being acquired and that these constraints are eased following the acquisition. Using a large sample of European acquisitions, we document that the level of cash that target firms hold, the sensitivity of cash to cash flow, and the sensitivity of investment to cash flow all decline, while investment increases following the acquisition. These effects are stronger in deals that are more likely to be associated… 
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