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Deterring Takeover: Evidence from a Large Panel of UK Firms

Author

Listed:
  • Andrew P. Dickerson

    ()

  • Heather D. Gibson
  • Euclid Tsakalotos

    ()

Abstract

We investigate the relationship between a company's dividend strategy and its risk of takeover. Our results from a large panel of UK quoted companies suggest that higher dividend payments are associated with a significantly lower conditional probability (hazard) of takeover. Moreover, firms which wish to avoid takeover would be better to distribute the marginal £1 of earnings in dividends rather than investing it in the company. We consider two explanations for these findings. We suggest that the presence of an active market for corporate control could encourage firms to raise dividends to maintain shareholder loyalty.

Suggested Citation

  • Andrew P. Dickerson & Heather D. Gibson & Euclid Tsakalotos, 1997. "Deterring Takeover: Evidence from a Large Panel of UK Firms," Studies in Economics 9707, School of Economics, University of Kent.
  • Handle: RePEc:ukc:ukcedp:9707
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    Citations

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    Cited by:

    1. Andrew P. Dickerson & Heather D. Gibson & Euclid Tsakalotos, 2003. "Is attack the best form of defence? A competing risks analysis of acquisition activity in the UK," Cambridge Journal of Economics, Oxford University Press, vol. 27(3), pages 337-357, May.
    2. Dickerson, Andrew P. & Gibson, Heather D. & Tsakalotos, Euclid, 2002. "Takeover risk and the market for corporate control: the experience of British firms in the 1970s and 1980s," International Journal of Industrial Organization, Elsevier, vol. 20(8), pages 1167-1195, October.
    3. Dimara, Efthalia & Tzelepis, Dimitris & Skuras, Dimitris, 2000. "Regional Development Incentives And Firm Survival: A Case Study Of The Greek Food Sector," ERSA conference papers ersa00p209, European Regional Science Association.

    More about this item

    Keywords

    Takeovers; Dividends; Investment; Hazard Functions;

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies

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