Cost Inefficiency,Size of Firms and Takeovers |
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Authors: | Trimbath Susanne Frydman Halina Frydman Roman |
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Institution: | (1) Milken Institute, 1250 4th Street, Santa Monica, CA, 90401;(2) Stern School of Business, New York University, New York, NY, 10003;(3) Department of Economics, New York University, New York, NY, 10003 |
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Abstract: | 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. |
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Keywords: | corporate finance and governance mergers acquisitions econometric methods models with panel data truncated and censored models |
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