The Market for Corporate Control and Corporate Cash Holdings
60 Pages Posted: 23 May 2000
Date Written: January 24, 2000
Abstract
Conventional wisdom asserts that firms with large cash holdings are likely takeover targets. Using hostile takeover activity from 1985-1994, I find the probability a firm will be acquired decreases with cash. This holds for firms with excess cash as well as those with poor investment opportunities. Cash decreases acquisition probability by deterring potential bids, but does not increase premiums offered when bids occur. Finally, cash decreases after passage of antitakeover legislation. Thus, managers may hold cash to entrench themselves at shareholders' expense. Consequently, the market for corporate control does not monitor corporate cash holdings. Rather, cash may decrease such monitoring.
JEL Classification: G34
Suggested Citation: Suggested Citation
Here is the Coronavirus
related research on SSRN
Recommended Papers
-
The Determinants and Implications of Corporate Cash Holdings
By Tim C. Opler, Lee Pinkowitz, ...
-
The Cash Flow Sensitivity of Cash
By Heitor Almeida, Murillo Campello, ...
-
Why Do U.S. Firms Hold so Much More Cash than They Used to?
By Thomas W. Bates, Kathleen M. Kahle, ...
-
Why Do U.S. Firms Hold so Much More Cash than They Used to?
By Thomas W. Bates, Kathleen M. Kahle, ...
-
Bank Lines of Credit in Corporate Finance: An Empirical Analysis
By Amir Sufi
-
Corporate Governance and Firm Cash Holdings
By Jarrad Harford, Sattar Mansi, ...
-
Corporate Financial Policy and the Value of Cash
By Michael W. Faulkender and Rong Wang
-
Is Cash Negative Debt? A Hedging Perspective on Corporate Financial Policies
By Heitor Almeida, Viral V. Acharya, ...
