Do takeover targets overinvest?

I examine the capital expenditures of a sample of 700 takeovertargets and firms that went private over the period 1972-1987.For the complete sample, I do not find evidence that takeovertargets increase their capital expenditures over the four yearperiod before the acquisition or that they overinvest in capitalexpenditures relative to several benchmarks. Subsample resultsprovide some evidence of overinvestment in oil and gas firmsand large firms. There is no evidence of overinvestment, however,for firms acquired in a hostile takeover or firms that wentprivate. In general, these results are not consistent with theconjecture that takeovers are motivated by the need to reduceexcess investment in capital expenditures in target firms.