Corporate takeovers in Malaysia: Discriminant analysis for bidder and target firms

Abstract

The paper looks into 144 non-financial firms in Malaysia for period 1980-1993, which includes bidders, targets, control bidders and control targets. A set of five economic/financial variables has been identified to discriminate between the firm's groupings using publicly available time series data. The empirical findings suggest that the (a) five predictive variables account for about 90% of the firm's groupings, (b) financial leverage is the most powerful discriminatory variable followed by profit, risk, size, and growth, in that order, (c) bidder firms have higher profit and growth, and lower leverage, risk and size, than the target firms, and accordingly provide some support that, (d) the takeover was motivated by the bidder firms desire for reaping the fruits of economies of scale in order to maintain the tempo of high profit and high growth and/or for displacement of inefficient managers of target firms. These results are corroborated by the logistic regression model.