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Predicting European Takeover Targets

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  • Gurvinder Brar
  • Daniel Giamouridis
  • Manolis Liodakis

Abstract

This article extends the Palepu (1986) acquisition likelihood model by incorporating measures of a technical nature, e.g. momentum, trading volume as well as a measure of market sentiment. We use the proposed model to predict takeover targets in a large sample of European and cross‐border merger and acquisition deals and validate its performance on an in‐ and out‐of‐sample basis. The robustness of the proposed model is investigated across several dimensions. In addition we explore the ability of the model to form the basis of successful takeover timing investment strategies. The results of our empirical analysis suggest that the proposed model predicts European takeover targets with relatively high accuracy and is able to determine portfolios that earn significant returns which are not explained by conventional risk factors.

Suggested Citation

  • Gurvinder Brar & Daniel Giamouridis & Manolis Liodakis, 2009. "Predicting European Takeover Targets," European Financial Management, European Financial Management Association, vol. 15(2), pages 430-450, March.
    • Handle: RePEc:bla:eufman:v:15:y:2009:i:2:p:430-450
    DOI: 10.1111/j.1468-036X.2007.00423.x
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    Cited by:

    1. Ronan Powell & Sarah Prendergast & Ruchira Sharma, 2022. "The impact of economic nationalism in Europe on the returns to rivals of cross‐border M&A bids," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 49(9-10), pages 1784-1829, October.
    2. Humphery-Jenner, M., 2011. "High Frequency Trading, Information, and Takeovers," Discussion Paper 2011-047, Tilburg University, Center for Economic Research.
    3. Lee, Ji Hye & Byun, Hee Sub & Park, Kyung Suh, 2019. "How does product market competition affect corporate takeover in an emerging economy?," International Review of Economics & Finance, Elsevier, vol. 60(C), pages 26-45.
    4. Humphery-Jenner, M., 2011. "Internal and External Discipline Following Securities Class Actions," Other publications TiSEM 9bcb5c91-4bab-431f-9891-1, Tilburg University, School of Economics and Management.
    5. Humphery-Jenner, M., 2011. "Internal and External Discipline Following Securities Class Actions," Discussion Paper 2011-044, Tilburg University, Center for Economic Research.
    6. Humphery-Jenner, M., 2011. "Internal and External Discipline Following Securities Class Actions," Other publications TiSEM 072318eb-d214-4c7a-ac7a-d, Tilburg University, School of Economics and Management.
    7. Tunyi, Abongeh A. & Ntim, Collins G. & Danbolt, Jo, 2019. "Decoupling management inefficiency: Myopia, hyperopia and takeover likelihood," International Review of Financial Analysis, Elsevier, vol. 62(C), pages 1-20.
    8. Humphery-Jenner, Mark L., 2012. "Internal and external discipline following securities class actions," Journal of Financial Intermediation, Elsevier, vol. 21(1), pages 151-179.
    9. Tunyi, Abongeh A., 2021. "Revisiting acquirer returns: Evidence from unanticipated deals," Journal of Corporate Finance, Elsevier, vol. 66(C).
    10. Antonio Roma, 2022. "Is the value effect due to M&A deals? Evidence from the Italian stock market," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 51(1), February.
    11. Abe De Jong & Philip T. Fliers, 2020. "Predicting Takeover Targets: Long-Run Evidence from the Netherlands," De Economist, Springer, vol. 168(3), pages 343-368, September.
    12. Humphery-Jenner, M., 2011. "Anti-takeover Provisions as a Source of Innovation and Value Creation," Other publications TiSEM 9eb6f6bf-8859-429e-a029-a, Tilburg University, School of Economics and Management.
    13. Pei Ling Lee & Roy Wye Leong Khong & Suganthi Ramasamy, 2010. "Characteristics of Firms Going Private in the Malaysian Stock Exchange," Economics Bulletin, AccessEcon, vol. 30(2), pages 1307-1319.
    14. Andrey Golubov & Dimitris Petmezas & Nickolaos G. Travlos, 2013. "Empirical mergers and acquisitions research: a review of methods, evidence and managerial implications," Chapters, in: Adrian R. Bell & Chris Brooks & Marcel Prokopczuk (ed.), Handbook of Research Methods and Applications in Empirical Finance, chapter 12, pages 287-313, Edward Elgar Publishing.
    15. Koch, Adam S. & Lefanowicz, Craig E. & Robinson, John R., 2012. "The effect of quarterly earnings guidance on share values in corporate acquisitions," Journal of Corporate Finance, Elsevier, vol. 18(5), pages 1269-1285.
    16. Humphery-Jenner, M., 2011. "High Frequency Trading, Information, and Takeovers," Other publications TiSEM 30aa1477-0fb2-46ed-a5eb-f, Tilburg University, School of Economics and Management.
    17. Basnet, Anup & Davis, Frederick & Walker, Thomas & Zhao, Kun, 2021. "The effect of securities class action lawsuits on mergers and acquisitions," Global Finance Journal, Elsevier, vol. 48(C).
    18. Humphery-Jenner, M., 2011. "High Frequency Trading, Information, and Takeovers," Other publications TiSEM 0e6dd147-6f57-4f32-b265-f, Tilburg University, School of Economics and Management.
    19. Tuan Ho & Ruby Brownen‐Trinh & Fangming Xu, 2021. "The information content of target price forecasts: Evidence from mergers and acquisitions," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 48(5-6), pages 1134-1171, May.
    20. Nico Dewaelheyns & Cynthia Van Hulle & Yannick Van Landuyt & Mathias Verreydt, 2021. "Labor Contracts, Wages and SME Failure," Sustainability, MDPI, vol. 13(14), pages 1-15, July.
    21. Humphery-Jenner, M., 2011. "Anti-takeover Provisions as a Source of Innovation and Value Creation," Discussion Paper 2011-045, Tilburg University, Center for Economic Research.
    22. Lee, Kangbok & Joo, Sunghoon & Baik, Hyeoncheol & Han, Sumin & In, Joonhwan, 2020. "Unbalanced data, type II error, and nonlinearity in predicting M&A failure," Journal of Business Research, Elsevier, vol. 109(C), pages 271-287.

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