Cost Inefficiency, Size of Firms and Takeovers

Cost Inefficiency, Size of Firms and Takeovers

This study, using the Cox proportional hazards model, finds that the risk of takeover rises with cost inefficiency. It also finds that a firm faces a significantly higher risk of takeover if its cost performance lags behind its industry benchmark. Moreover, these findings appear to be remarkably sta...

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Bibliographic Details
Published in:Review of quantitative finance and accounting 2001-12, Vol.17 (4), p.397-420
Main Authors: Trimbath, Susanne, Frydman, Halina, Frydman, Roman
Format: Article
Language:eng
Subjects:
Acquisitions & mergers
Corporate finance
Corporate governance
Cost accounting
Cost control
Econometric models
Econometrics
Economic efficiency
Efficiency
Mergers
Size of enterprise
Studies
Take-overs
Technical efficiency
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Summary:This study, using the Cox proportional hazards model, finds that the risk of takeover rises with cost inefficiency. It also finds that a firm faces a significantly higher risk of takeover if its cost performance lags behind its industry benchmark. Moreover, these findings appear to be remarkably stable over the nearly two decades spanned by the sample. The effect of the variables used to measure the risk-size relationship, however, indicates temporal changes. Lastly, the study presents evidence from fixed-effects models of ex post cost efficiency improvements that support the hypothesis that takeover targets are selected based on the potential for improvement. [PUBLICATION ABSTRACT]
ISSN:0924-865X
1573-7179