Stock Market and Financial Variables and a Theory of Takeover

Abstract

In this chapter I shall set out a theory of takeovers based upon comparisons of the financial and stock market performance of firms taken over and firms not taken over. I am not attempting to simply discriminate between the two groups on whatever basis proves statistically significant,* but rather hope to provide economic justification for the inclusion of various variables which theoretically should operate to determine the causes of takeover. Only then can meaningful conclusions with respect to the theory of the firm be drawn from the statistical testing procedures employed in chapters 3 and 4.