Are Corporate Restructuring Events Driven by Common Factors? Implications for Takeover Prediction

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Title: Are Corporate Restructuring Events Driven by Common Factors? Implications for Takeover Prediction
Authors: Powell, Ronan
Yawson, Alfred
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Date: Oct-2007
Online since: 2016-02-12T15:20:35Z
Abstract: The paper shows that variables commonly used in takeover prediction models also help to explain the likelihood of several other restructuring events, including divestitures,bankruptcies and significant employee lay offs. This finding helps to explain the larger misclassification errors in binomial takeover prediction models commonly used in prior research.The results show that modelling takeover prediction models in a binomial setting is likely to lead to misspecification in the parameter estimates and, further, result in erroneous conclusions about the determinants of takeover likelihood. The paper shows that controlling for other restructuring events by using a multinomial framework results in consistently lower misclassification errors in out-of-sample prediction tests, when compared to the benchmark of a typical binomial model.
Type of material: Journal Article
Publisher: Wiley
Journal: Journal of Business Finance and Accounting
Volume: 34
Issue: 7-8
Start page: 1169
End page: 1192
Copyright (published version): 2007 Blackwell Publishing Ltd
Keywords: Corporate restructuringTakeoversDivestituresLayoffsBankruptciesType II error
DOI: 10.1111/j.1468-5957.2007.02028.x
Language: en
Status of Item: Peer reviewed
Appears in Collections:Business Research Collection

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