A LOGIT Model Applied to Predict Corporate Takeovers

D. Dhayanithy and K. Vasudevan (India)


Acquisitions, Takeover targets, LOGIT


: Mergers and acquisitions have long played an important role in the growth of firms. A review of mergers and acquisitions literature suggests that several firm characteristics (variables) are likely to influence the probability of takeover. More specifically, corporate investing, corporate financing and dividend policies have been shown to have a significant impact on companies becoming takeover targets. In addition to these classes of variables, this paper also considers a new set of variables namely the ownership variables. Then using a binomial choice model namely the LOGIT model, the drivers of acquisitions are ascertained. The LOGIT model categorizes the sample firms into takeover targets and non takeover targets with an accuracy of 92.4%.

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