Author： Baixauli J. Samuel Fernández Matilde O.
Publisher： Emerald Group Publishing Ltd
ISSN： 1086-7376
Source： Studies in Economics and Finance, Vol.26, Iss.2, 2009-06, pp. : 69-86
Disclaimer: Any content in publications that violate the sovereignty, the constitution or regulations of the PRC is not accepted or approved by CNPIEC.
Abstract
Purpose ‐ The purpose of this paper is to propose various toehold indicators and analyse whether the models incorporating these indicators can be used to establish investment strategies. Design/methodology/approach ‐ Logistic regression is used to test toehold indicator significance. Findings ‐ The results reflect that the designed measures are positively correlated to the likelihood of launching a takeover, although the power of the models to predict out-sample takeovers is moderate, between 60.71 percent and 71.59 percent. The indicators allow us to design strategies which offer positive abnormal returns. In particular, abnormal return over the Fama-French factors is 0.5 percent. Originality/value ‐ Toeholds are used to initiate takeover processes. As previous studies have indicated, a toehold increases the likelihood of success in a tender offer. Nevertheless, the studies on takeover prediction do not include the toehold since it is a variable which is unobservable prior to the announcement of a takeover bid.
Related content
Access to resources
Recommend
