Hostname: page-component-76fb5796d-r6qrq Total loading time: 0 Render date: 2024-04-26T10:25:30.772Z Has data issue: false hasContentIssue false
  • English
  • Français

The Role of Asset Structure, Ownership Structure, and Takeover Defenses in Determining Acquisition Likelihood

Published online by Cambridge University Press:  06 April 2009

Brent W. Ambrose  and
William L. Megginson
Get access Rights & Permissions [Opens in a new window]

Abstract

This paper extends the Palepu (1986) acquisition likelihood model by incorporating measures of insider and institutional shareholdings, by examining the deterrent effect of various takeover defenses, and by considering the effect of varying proportions of fixed (tangible) assets in a firm's total asset structure. We find that the probability of receiving a takeover bid is positively related to tangible assets, and negatively related to firm size and to the net change in institutional holdings. Blank-check preferred stock authorizations are the only common takeover defense significantly (negatively) correlated with acquisition likelihood.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 27 , Issue 4 , December 1992 , pp. 575 - 589
Copyright
Copyright © School of Business Administration, University of Washington 1992

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Agrawal, A., and Mandelker, G. N.. “Managerial Incentives and Corporate Investment and Financing Decisions.” Journal of Finance, 42 (09 1987), 823–837.CrossRefGoogle Scholar
Agrawal, A., and Mandelker, G. N.. “Large Shareholders and the Monitoring of Managers: The Case of Antitakeover Charter Amendments.” Journal of Financial and Quantitative Analysis, 25 (06 1990), 143–161.CrossRefGoogle Scholar
Ambrose, B. W. “Corporate Real Estate's Impact on the Takeover Market.” Journal of Real Estate Finance and Economics, 3 (10 1990), 307–322.CrossRefGoogle Scholar
Ambrose, B. W.; van Houwelingen, W.; and Megginson, W. L.. “A Direct Test of the Effectiveness of Takeover Defenses Adopted by S&P 500 Companies.” Unpubl. Working Paper, Univ. of Georgia (05 1991).Google Scholar
Bradley, M.; Jarrell, G.; and Kim, E. H.. “On the Existence of an Optimal Capital Structure.” Journal of Finance, 39 (05 1984), 857–878.Google Scholar
Brickley, J. A.; Lease, R. C.; and Smith, C. W. Jr, “Ownership Structure and Voting on Antitakeover Amendments.” Journal of Financial Economics, 20 (01/03 1988), 269–291.CrossRefGoogle Scholar
Demsetz, H., and Lehn, K.. “The Structure of Corporate Ownership: Causes and Consequences.” Journal of Political Economy, 93 (12 1985), 1155–1177.CrossRefGoogle Scholar
Fama, E. F. “Agency Problems and the Theory of the Firm.” Journal of Political Economy, 88 (04 1980), 288–307.Google Scholar
Fama, E. F, and Jensen, M. C.. “Separation of Ownership and Control.” Journal of Law and Economics, 26 (06 1983), 301–325.CrossRefGoogle Scholar
Fama, E. F, and Jensen, M. C.. “Organizational Forms and Investment Decisions.” Journal of Financial Economics, 14 (03 1985), 101–119.CrossRefGoogle Scholar
Holderness, C. G., and Sheehan, D. P.. “The Role of Majority Shareholders in Publicly Held Corporations: An Exploratory Analysis.” Journal of Financial Economics, 20 (01/03 1988), 317–346.Google Scholar
Huang, Y.-S., and Walkling, R. A.. “Target Abnormal Returns Associated with Acquisition Announcements: Payment, Acquisition Form, and Managerial Resistance.” Journal of Financial Economics, 19 (12 1987), 329–349.CrossRefGoogle Scholar
Investor Responsibility Research Center, Inc. Antitakeover Charter Amendments: A Directory of Major American Corporations. Washington, D.C. (1984), (1985), (1986).Google Scholar
Jarrell, G. A., and Poulsen, A. B.. “Shark Repellents and Stock Prices: The Effects of Antitakeover Amendments since 1980.” Journal of Financial Economics, 19 (09 1987), 127–168.Google Scholar
Jarrell, G. A., and Poulsen, A. B.. “Dual-Class Recapitalization as Antitakeover Mechanisms: The Recent Evidence.” Journal of Financial Economics, 20 (01/03 1988), 129–152.Google Scholar
Jensen, M. C, and Meckling, W. H.. “Theory of the Firm: Managerial Behavior, Agency Cost and Ownership Structure.” Journal of Financial Economics, 3 (10 1976), 305–360.CrossRefGoogle Scholar
Lang, L. H. P.; Stulz, R. M.; and Walkling, R. A.. “Managerial Performance, Tobin's Q, and the Gains From Successful Tender Offers.” Journal of Financial Economics, 24 (12 1989), 137–154.Google Scholar
Lewellen, W.; Loderer, C.; and Rosenfeld, A.. “Merger Decisions and Executive Stock Ownership in Acquiring Firms.” Journal of Accounting and Economics, 7 (04 1985), 209–231.Google Scholar
Malatesta, P. H., and Walkling, R. A.. “Poison Pill Securities: Stockholder Wealth, Profitability and Ownership Structure.” Journal of Financial Economics, 20 (01/03 1988), 347–376.CrossRefGoogle Scholar
Megginson, W. L.; Fischer, L. H.; and Blackwell, D. W.. “The Wealth Effects of Preferred Stock Authorization Proposals.” Unpubl. Working Paper, Univ. of Georgia (06 1988).Google Scholar
Mikkelson, W. H., and Partch, M. M.. “Managers Voting Rights and Corporate Control.” Journal of Financial Economics, 25 (12 1989), 263–290.CrossRefGoogle Scholar
Mitchell, M. L., and Lehn, K.. “Do Bad Bidders Become Good Targets?” Journal of Political Economy, 98 (04 1990), 372–398.Google Scholar
Myers, S. “The Determinants of Corporate Borrowing.” Journal of Financial Economics, 5 (11 1977), 147–176.CrossRefGoogle Scholar
Myers, S., and Majluf, N.. “Corporate Financing and Investment Decisions When Firms Have Information Investors Do Not Have.” Journal of Financial Economics, 13 (06 1984), 187–221.Google Scholar
Palepu, K. G. “The Determinants of Acquisition Likelihood.” Unpubl. Working Paper, Harvard Univ. (1984).Google Scholar
Palepu, K. G. “Predicting Takeover Targets: A Methodological and Empirical Analysis.” Journal of Accounting and Economics, 8 (03 1986), 3–37.Google Scholar
Partch, M. M. “The Creation of a Class of Limited Voting Common Stock and Shareholder Wealth.” Journal of Financial Economics, 18 (06 1987), 313–339.Google Scholar
Pound, J. “The Effects of Antitakeover Amendments on Takeover Activity: Some Direct Evidence.” Journal of Law and Economics, 30 (10 1987), 353–367.Google Scholar
Pound, J. “Proxy Voting and the Efficiency of Shareholder Oversight.” Journal of Financial Economics, 20 (01/03 1988), 237–265.Google Scholar
Ryngaert, M. “The Effect of Poison Pill Securities on Shareholders Wealth.” Journal of Financial Economics, 20 (01/03 1988), 377–417.CrossRefGoogle Scholar
Scott, J. “Bankruptcy, Secured Debt and Optimal Capital Structure.” Journal of Finance, 32 (03 1977), 1–20.Google Scholar
Shleifer, A., and Vishny, R. W.. “Large Shareholders and Corporate Control.” Journal of Political Economy, 94 (06 1986), 461–488.Google Scholar
Song, M. H., and Walkling, R. A.. “The Impact of Managerial Ownership on Acquisition Attempts and Target Shareholder Wealth.” Unpubl. Working Paper, San Diego State Univ. and Ohio State Univ. (08 1990).Google Scholar
Stulz, R. M. “Managerial Control of Voting Rights: Financial Policies and the Market for Corporate Control.” Journal of Financial Economics, 20 (01/03 1988), 25–54.CrossRefGoogle Scholar
Stulz, R. M., and Johnson, H.. “An Analysis of Secured Debt.” Journal of Financial Economics, 14 (12 1985), 501–521.Google Scholar
Stulz, R. M.; Walkling, R. A.; and Song, M. H.. “The Distribution of Target Ownership and the Division of Gains in Successful Takeovers.” Journal of Finance, 45 (07 1990), 817–833.CrossRefGoogle Scholar
Titman, S., and Wessels, R.. “The Determinants of Capital Structure Choice.” Journal of Finance, 43 (03 1988), 1–19.CrossRefGoogle Scholar
Walkling, R., and Long, M. S.. “Agency Theory, Managerial Welfare, and Takeover Bid Resistance.” Rand Journal of Economics, 1 (Spring 1984), 54–68.CrossRefGoogle Scholar
Weston, J. E.; Chung, K. S.; and Hoag, S. E.. Mergers, Restructuring and Corporate Control. Englewood Cliffs, NJ: Prentice Hall (1990).Google Scholar