Microsoft Word 2007 ichrie conference Proceedings Final-Final 06-06-07. doc

and the acquirer’s growth opportunities. 
When acquiring firms have poor investment opportunities, the free cash flow of the acquiring firm may be 
used for acquisitions to enhance managerial power instead of paying out free cash flow as a dividend. Firms with a 
high level of growth opportunities may conserve cash to be able to take advantage of those opportunities and hence 
use stock financing in an acquisition. 
H
4
: There is a significant negative relationship between the acquirer’s use of cash financing in an acquisition