Slack Resources, Mergers and Acquisitions and Economic Consequences

This paper studies the functions of slack resources in enterprise M&A and its relationships with M&A performance. Our samples are collected from A-share listed companies in Shanghai and Shenzhen stock exchange. Slack resource is the difference between existing resources and demands of daily operations which is necessary for a company's external expansion, especially for mergers and acquisitions. Our empirical results show that an acquiring firm's slack resources is positively related with the probability that it makes acquisitions. Furthermore, acquiring firms with more slack resources have a better post-M&A performance, which support the behavior theory hypothesis of firms.