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Predicting UK Takeover Targets: Some Methodological Issues and an Empirical Study

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  • Barnes, Paul

Abstract

This paper examines the methodological issues of using accounting ratios to predict takeover targets. Certain improvements are suggested, notably the use of industry-relative ratios and the determination of an ex ante cut off point which maximizes returns. The empirical study suggests that industry-relative ratios are not an improvement upon industry-specific models and that, although the models perform better than chance, they do not perform sufficiently well as to earn excess returns. Unfortunately, the results are not sufficiently sensitive as to be significantly affected by the choice of cut off point. Copyright 1999 by Kluwer Academic Publishers

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  • Barnes, Paul, 1999. "Predicting UK Takeover Targets: Some Methodological Issues and an Empirical Study," Review of Quantitative Finance and Accounting, Springer, vol. 12(3), pages 283-301, May.
    • Handle: RePEc:kap:rqfnac:v:12:y:1999:i:3:p:283-301
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    Cited by:

    1. Athanasios Tsagkanos & Evangelos Koumanakos & Antonios Georgopoulos & Costas Siriopoulos, 2012. "Prediction of Greek takeover targets via bootstrapping on mixed logit model," Review of Accounting and Finance, Emerald Group Publishing Limited, vol. 11(3), pages 315-334, August.
    2. Ronan G. Powell, 2004. "Takeover Prediction Models and Portfolio Strategies: A Multinomial Approach," Multinational Finance Journal, Multinational Finance Journal, vol. 8(1-2), pages 35-72, March-Jun.
    3. Nuria Alcalde & Manuel Espitia, 2003. "The Characteristics of Takeover Targets: The Spanish Experience 1991–1997," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 7(1), pages 1-26, March.
    4. Andriosopoulos, Dimitrios & Gaganis, Chrysovalantis & Pasiouras, Fotios & Zopounidis, Constantin, 2012. "An application of multicriteria decision aid models in the prediction of open market share repurchases," Omega, Elsevier, vol. 40(6), pages 882-890.
    5. Rodrigues, Bruno Dore & Stevenson, Maxwell J., 2013. "Takeover prediction using forecast combinations," International Journal of Forecasting, Elsevier, vol. 29(4), pages 628-641.
    6. 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.
    7. Piet Eichholtz & Nils Kok, 2008. "How Does the Market for Corporate Control Function for Property Companies?," The Journal of Real Estate Finance and Economics, Springer, vol. 36(2), pages 141-163, February.
    8. 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.
    9. Dong, Liping & Uchida, Konari & Hou, Xiaohong, 2014. "Block trade targets in China," Journal of Corporate Finance, Elsevier, vol. 25(C), pages 188-201.
    10. Pasiouras, Fotios & Tanna, Sailesh, 2010. "The prediction of bank acquisition targets with discriminant and logit analyses: Methodological issues and empirical evidence," Research in International Business and Finance, Elsevier, vol. 24(1), pages 39-61, January.
    11. Andy Cosh & Alan Hughes, 2008. "Takeovers after "Takeovers"," Working Papers wp363, Centre for Business Research, University of Cambridge.
    12. 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.
    13. Yuan Gao & Derek Oler, 2012. "Rumors and pre-announcement trading: why sell target stocks before acquisition announcements?," Review of Quantitative Finance and Accounting, Springer, vol. 39(4), pages 485-508, November.
    14. Humphery-Jenner, M., 2011. "High Frequency Trading, Information, and Takeovers," Discussion Paper 2011-047, Tilburg University, Center for Economic Research.
    15. Nuria Alcalde Fradejas & Inés Pérez-Soba Aguilar, 2007. "Influencia de las ofertas públicas de adquisición sobre el empleo de las empresas adquiridas: un análisis empírico," Investigaciones Economicas, Fundación SEPI, vol. 31(1), pages 5-42, January.
    16. 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.
    17. Dirk Brounen & Mathijs van Dijk & Piet M.A. Eichholtz, 2008. "Corporate Real Estate and Corporate Takeovers: International Evidence," Journal of Real Estate Research, American Real Estate Society, vol. 30(3), pages 293-314.
    18. Katsafados, Apostolos G. & Leledakis, George N. & Pyrgiotakis, Emmanouil G. & Androutsopoulos, Ion & Fergadiotis, Manos, 2024. "Machine learning in bank merger prediction: A text-based approach," European Journal of Operational Research, Elsevier, vol. 312(2), pages 783-797.
    19. Erik Lehmann & Thorsten Braun & Sebastian Krispin, 2012. "Entrepreneurial human capital, complementary assets, and takeover probability," The Journal of Technology Transfer, Springer, vol. 37(5), pages 589-608, October.
    20. Athanasios Tsagkanos & Antonios Georgopoulos & Costas Siriopoulos & Evangelos Koumanakos, 2008. "Identification of Greek Takeover Targets and Coherent Policy Implications," Review of Development Economics, Wiley Blackwell, vol. 12(1), pages 180-192, February.
    21. 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.
    22. Pasiouras, Fotios & Gaganis, Chrysovalantis & Zopounidis, Constantin, 2010. "Multicriteria classification models for the identification of targets and acquirers in the Asian banking sector," European Journal of Operational Research, Elsevier, vol. 204(2), pages 328-335, July.
    23. Nuria Alcalde Fradejas & Manuel Espitia Escuer & Jaime Vallés Giménez, "undated". "El mercado para el control de empresas en Espana. Identificación de las empresas objetivo de OPA," Studies on the Spanish Economy 159, FEDEA.
    24. Antonios Georgopoulos & George Argyros & Giota Boura, 2008. "Which Targets Stimulate Cross-border Acquisitions? An Empirical Investigation of Industrial Organization and Trade Factors within a Competition Framework of International and Domestic Acquisition Targ," Journal of Industry, Competition and Trade, Springer, vol. 8(1), pages 55-72, March.
    25. Pasiouras, Fotios & Tanna, Sailesh & Zopounidis, Constantin, 2007. "The identification of acquisition targets in the EU banking industry: An application of multicriteria approaches," International Review of Financial Analysis, Elsevier, vol. 16(3), pages 262-281.

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