Firms with negative net cash flows (NCFs) play an empirically important role in recent decades’ increase in the average cash-balance ratio of publicly held non-financial firms. Since 1971, negative NCFs have become much more pervasive, persistent, and greater in magnitude, and these patterns hold within the growing set of firms that have high intangible capital. In recent years, firms with negative NCFs tend to build cash balances through frequent equity offerings. The high cash balances tend to be transitory as subsequent negative NCFs lead firms to rapid cash-balance drawdowns, often followed by new stock sales and cash stockpiling of the proceeds. We conclude that funding needs and staged equity financing by negative NCF firms are central features of the secular rise in the average cash-balance ratio.

This study evaluates the relation between hostile takeovers and 17 takeover laws from 1965 to 2014. Using a data set of largely exogenous legal changes, we find that certain takeover laws, such as poison pill and business combination laws, have no discernible impact on hostile activity, while others such as fair price laws have reduced hostile takeovers. We construct a Takeover Index from the laws and find that higher takeover protection is associated with lower firm value, consistent with entrenchment and agency costs. However, conditional on a bid, firms with more protection achieve higher premiums, consistent with increased bargaining power.