Toeholds and takeover probability: implications for investment strategies
Purpose – The purpose of this paper is to propose various toehold indicators and analyse whether the models incorporating these indicators can be used to establish investment strategies. Design/methodology/approach – Logistic regression is used to test toehold indicator significance. Findings – The results reflect that the designed measures are positively correlated to the likelihood of launching a takeover, although the power of the models to predict out-sample takeovers is moderate, between 60.71 percent and 71.59 percent. The indicators allow us to design strategies which offer positive abnormal returns. In particular, abnormal return over the Fama-French factors is 0.5 percent. Originality/value – Toeholds are used to initiate takeover processes. As previous studies have indicated, a toehold increases the likelihood of success in a tender offer. Nevertheless, the studies on takeover prediction do not include the toehold since it is a variable which is unobservable prior to the announcement of a takeover bid.
Volume (Year): 26 (2009)
Issue (Month): 2 (June)
|Contact details of provider:|| Web page: http://www.emeraldinsight.com|
|Order Information:|| Postal: Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK|
Web: http://emeraldgrouppublishing.com/products/journals/journals.htm?id=sef Email:
When requesting a correction, please mention this item's handle: RePEc:eme:sefpps:v:26:y:2009:i:2:p:69-86. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Louise Lister)
If references are entirely missing, you can add them using this form.