Takeover risk and the market for corporate control: the experience of British firms in the 1970s and 1980s
AbstractThis paper investigates the determinants of takeovers in a large sample of UK quoted companies. We focus on the channels through which the market for corporate control monitors company performance and discretionary managerial behaviour. Our results indicate that the market for corporate control disciplines poorly performing companies, and that this effect is quantitatively important: a one standard deviation increase in profitability is associated with a fall in the conditional probability of takeover of over 20%. However, we find no evidence that firms without apparent profitable investment opportunities are more likely to be taken over if managers increase investment or reduce dividends, contrary to the predictions of the free cash-flow theory of takovers.
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Bibliographic InfoArticle provided by Elsevier in its journal International Journal of Industrial Organization.
Volume (Year): 20 (2002)
Issue (Month): 8 (October)
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Web page: http://www.elsevier.com/locate/inca/505551
Other versions of this item:
- Andrew P. Dickerson & Heather D. Gibson & Euclid Tsakalotos, 1998. "Takeover Risk and the Market for Corporate Control: The Experience of British Firms in the 1970s and 1980s," Studies in Economics 9803, Department of Economics, University of Kent.
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
- G3 - Financial Economics - - Corporate Finance and Governance
- C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies
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