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The impact of horizontal mergers on suppliers' cash holdings

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  • James E. Upson
  • Chao Wei

Abstract

We examine the impact of customer horizontal mergers on suppliers' cash holdings. We show that suppliers strategically reduce their cash holdings after the merger to counteract the increased bargaining power of merged customers. This effect is more pronounced when the supplier relies on customers and less when the supplier operates in a concentrated industry. Consistent with the bargaining power hypothesis of cash holdings, we find that cash‐reducing suppliers experience higher postmerger cash‐flow margins. Finally, we show that suppliers are more likely to use cash reserves to finance their research and development investments to credibly reduce liquidity.

Suggested Citation

  • James E. Upson & Chao Wei, 2025. "The impact of horizontal mergers on suppliers' cash holdings," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 48(4), pages 1644-1670, December.
    • Handle: RePEc:bla:jfnres:v:48:y:2025:i:4:p:1644-1670
    DOI: 10.1111/jfir.12459
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