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Identifying the Characteristics of Target Firms: A Regression Analysis

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Title: Identifying the Characteristics of Target Firms: A Regression Analysis
Authors: Teo, May
Issue Date: 26 Sep 2014
Publisher: University of Hawaii at Manoa
Abstract: The purpose of this study is to identify a set of variables that best differentiate acquired companies from the nonacquired ones, by using both financial ratios and quantitative variables. The basic difference between previous studies and this is that none of the previous one uses qualitative variables to explain the effects that cannot be captured using financial ratios. Since the multivariate method has proven to be better predictor for events like bankruptcies, credit ratings, bond ratings, and acquisitions than univariate tests, a multivariate regression technique is employed in this study. Any technique that can predict acquisitions is both advantageous to management and investors. In identifying potential acquisitions, management can either use it for investment purposes or for defending against potential acquisition threats. In addition, such a technique may provide information to antitrust regulators concerning the capital structure, and profit margin. This paper is divided into six sections. The first involves a general illustration of the mergers and acquisitions trends in terms of the number of transactions and the values paid. In the following section, the basic literature reviews of the theories of mergers and acquisition, the formulation of hypotheses, and an illustrative case example on Phillips Petroleum will be discussed. The third section deals with the methodology of the empirical study. In this section, the basic study assumptions are made. In addition, the experimental design and approach of regression technique are discussed. The next section explains the empirical model and the classification ability of the model. The fifth section reviews and compare the results obtained from previous studies. The final section summarizes the contents. It also includes an evaluation of the model by stating the limitations and problems.
Pages/Duration: 115 pages
Rights: All UHM Honors Projects are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission from the copyright owner.
Appears in Collections:Honors Projects for Finance

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