Linear Probability Models of Takeovers II

Abstract

In this chapter I shall attempt to capture the influence the firm’s financial characteristics — profit rate, growth rate, retention ratio, and liquidity ratio — have on whether or not the firm is taken over. As in model I, the relationship will be estimated at the industry level by means of the linear probability function technique. The purpose is not only to discover whether there are significant differences in the performance of taken over and surviving firms, but also to investigate the effect of some of the variables which might be expected to influence the basic valuation ratio takeover relationship explored in the previous chapter.