Determinants of bid outcome in a hostile environment

Jarick, Michael (2010). Determinants of bid outcome in a hostile environment Honours Thesis, UQ Business School, The University of Queensland.

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Author Jarick, Michael
Thesis Title Determinants of bid outcome in a hostile environment
School, Centre or Institute UQ Business School
Institution The University of Queensland
Publication date 2010-10-28
Thesis type Honours Thesis
Supervisor Peter Clarkson
Total pages 94
Language eng
Subjects 1501 Accounting, Auditing and Accountability
Abstract/Summary This thesis examines whether determinants may be used to distinguish successful from unsuccessful hostile takeover bids, and subsequently whether investing in successful takeover bids yields superior returns. The motivation for this study is derived from the perceived increase in takeover activity in the Australian market for corporate control in recent years, and from observations suggesting value may be derived from investing in hostile takeover targets likely tosucceed. Using a sample of 142 hostile takeover bids between January 2000 and December 2009, we find evidence to support the use of a bid outcome model with reported total outcome accuracy ranging between 80.28 and 70.42 percent. Furthermore, when we retrospectively use the prediction model as a basis for trade decisions we report average market adjusted returns ranging from 19.8 to 12.5 percent per transaction, comparatively a naïve model investing in all hostile takeovers returned 8.2 percent per transaction. All results are verified as robust through subsequent testing. These results indicate the use of the bid outcome model improves expected returns, however, the nature of this study makes these returns unfeasible as trade decisions would be made prior to generating the prediction by the model. This study stands to contribute to the current academic literature through the specific sample examined, and through the evaluative methods employed. A potential practical contribution of this study is through the selection of deal attributes when initiating a hostile takeover bid in a professional setting.

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Created: Mon, 16 Jul 2012, 12:44:37 EST by Karen Morgan on behalf of UQ Business School