Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/102370
Authors: 
Gao, Ning
Mohamed, Abdulkadir
Year of Publication: 
2011
Series/Report no.: 
Manchester Business School Working Paper 624
Abstract: 
Cash-rich bidders in UK have better announcement abnormal returns than cash-poor ones during 1984-2007, contrasting previous findings in the US. The positive cash reserve effect is mainly from bidders of high long-run growth or those with non-trivial institutional holdings. Moreover, cash-rich bidders' post-acquisition operating performance is positively related to bidder cash reserve and institutional holdings. Our results suggest the precautionary motive underlies bidder cash reserve effects. Specifically, cash-rich bidders are better positioned to capture growth opportunities arising from acquisitions. Our results also suggest that strong shareholder power is necessary to ensure cash reserved in the interests of shareholders.
Subjects: 
precuationary motive of cash reserve
excess cash reserve
acquisition
institutional holding
shareholder power
announcement effect
JEL: 
G34
D82
Document Type: 
Working Paper

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