Cost Inefficiency, Size of Firms, and Takeovers

42 Pages Posted: 13 Nov 2008

See all articles by Halina Frydman

Halina Frydman

New York University (NYU) - Department of Information, Operations, and Management Sciences

Roman Frydman

New York University (NYU) - Department of Economics

Susanne Trimbath

STP Advisory Services, LLC; Creighton University, Department of Finance and Economics; Bellevue University - College of Business

Multiple version iconThere are 4 versions of this paper

Date Written: 2000

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. These findings, moreover, appear to be remarkably stable over the nearly two decades spanned by the sample. The effect of the variables measuring the risk-size relationship, however, indicate 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.

Keywords: Corporate Finance and Governance, Mergers, Acquisitions, Econometric Methods, Models with Panel Data, Truncated and Censored Models

Suggested Citation

Frydman, Halina and Frydman, Roman and Trimbath, Susanne, Cost Inefficiency, Size of Firms, and Takeovers (2000). NYU Working Paper No. FIN-00-061. Available at SSRN: https://ssrn.com/abstract=1300738

Halina Frydman (Contact Author)

New York University (NYU) - Department of Information, Operations, and Management Sciences ( email )

44 West Fourth Street
New York, NY 10012
United States
212-998-0453 (Phone)

Roman Frydman

New York University (NYU) - Department of Economics ( email )

19 West 4th Street
New York, NY 10012
United States

Susanne Trimbath

STP Advisory Services, LLC ( email )

PO Box 1252
Bellevue, NE 68005
United States
4029328888 (Phone)

HOME PAGE: http://www.STPAdvisors.com

Creighton University, Department of Finance and Economics ( email )

United States

Bellevue University - College of Business ( email )

United States

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