In this paper, we show that acquirers’ free cash flow (FCF) levels have significant impacts on their takeover activities and consequences. The targets acquired by low-FCF acquirers are of inferior quality relative to those obtained by high-FCF acquirers. Low-FCF acquirers also incline using...

Studies on corporate takeovers are voluminous but typically assume that acquirers are not financially constrained. We show that acquirers’ free cash flow (FCF) levels have significant impacts on their takeover activities and consequences. Acquirers with low FCF, despite their high levels of...