Abstract
Cash flow plays a significant role in a firm’s operation. Bidders with low cash flow perform poorly in the stock market, their operation deteriorates, and finally a significant number become bankruptcy or acquired by other firms following the acquisitions. Bidders with high cash flow also perform poorly if they waste excess cash flow on high-leverage targets. Conversely, they perform well following the acquisitions of low-leverage targets. Additionally, there is a striking change of cash holding-cash flow association in the past decades. Cash-rich firms exhibit high cash flow level before 1980s, but they exhibit extremely low cash flow since year 1980.
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