00980nam a22001097a 4500008004100000022001400041245005900055260003400114300001800148440005500166500064900221190322b        xxu||||| |||| 00| 0 eng d  a0304-405X  aCash windfalls and acquisitionscBastian von Beschwitz  aAmsterdambElseviercMay 2018  aPages 287-319  aJournal of Financial Economicsv128 (2)x0304-405X  aAbstract
This article studies the effect of cash windfalls on the acquisition policy of companies. As identification, I use a German tax reform that permitted firms to sell their equity stakes tax free. Companies that could realize a cash windfall by selling equity stakes see an increase in the probability of acquiring another company by 14%. I find that these additional acquisitions destroy firm value. Following the tax reform, affected firms experience a decrease of 1.2 percentage points in acquisition announcement returns. These effects are stronger for larger cash windfalls. My findings are consistent with the free cash flow theory.