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Takeovers, institutional investment and the persistence of profits

Author

Listed:
  • Cosh, Andy
  • Hughes, Alan
  • Lee, Kevin
  • Singh, Ajit

Abstract

This paper studies the impact of takeovers on the profitability of the participating companies and the influence of institutional investors on this process. It involves an original approach to assessing the profitability impact by modelling the dynamics of corporate profitability. It is shown that the standard counterfactual assumptions made in most merger effect studies are biased against finidng profit-enhancing merger effects where acquiring firms display above average profitabiltiy prior to the merger. On the other hand, acquisition is shown to reinforce the tendency amongst companies for their profitability to move towards industry norms over time.

Suggested Citation

  • Cosh, Andy & Hughes, Alan & Lee, Kevin & Singh, Ajit, 1996. "Takeovers, institutional investment and the persistence of profits," MPRA Paper 39061, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:39061
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    File URL: https://mpra.ub.uni-muenchen.de/39061/1/MPRA_paper_39061.pdf
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    Citations

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    Cited by:

    1. Singh, A., 1997. "Liberalisation, the Stock Market and the Market for Corporate Control: A Bridge Too Far for the Indian Economy?," Accounting and Finance Discussion Papers 97-af35, Faculty of Economics, University of Cambridge.

    More about this item

    Keywords

    company takeover; insitutional investors; company profitability;
    All these keywords.

    JEL classification:

    • L0 - Industrial Organization - - General
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G3 - Financial Economics - - Corporate Finance and Governance

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