Ali, Ruhani and G. S. Gupta, G. S. Gupta
(2000)
Corporate Takeovers In Malaysia:
Discriminant Analysis For Bidder And Target Firms.
Asian Academy of Management Journal (AAMJ), 5 (1).
pp. 1-14.
ISSN 1394-2603
Abstract
This study provides an explanatory model for the takeover selection process in
Malaysia using 144 non-fmancial firms, which includes bidders, targets, control
bidders and control targets for period 1980-1993. The takeover firms are first
analyzed on a univariate basis to assess the differences in the bidder and target
groups to examine if the bidder firms were more efficient than the target firms
were. The discriminant model that provides a useful tool for explaining the
categorical classification is then used for delineating the bidder and target firms. A
set of five economic/financial variables has been identified to discriminate between
the firm’s groupings using publicly available time series data. The empirical
findings suggest that; a) five predictive variables account for about 90% of the
firms’ groupings, b) fmancial leverage is the most powerful discriminatory variable
followed by profit, risk, size, and growth, in that order, c) bidder firms have higher
profit and growth, and lower leverage, risk and size, than the target firms, and
accordingly provide some support that, d) the takeover was motivated by the bidder
firms’ desire for reaping the fruits of economies of scale in order to maintain the
tempo of high profit and high growth and/or for displacement of inefficient
managers of target firms. The accuracy of the results is shown to hold using the
logistic regression model.
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