The Probit Model of Takeovers

Abstract

In this chapter I shall attempt to examine some of the variables previously employed in models I and II in a univariate context with all the 3566 firms taken together so that industry classes are ignored. There are several reasons why I choose to examine takeovers in this way which stem from the earlier results. First, I shall look at the impact of each of the variables by themselves because of the multi collinearity problem discussed in the previous chapter with respect to profitability and growth. Furthermore, the causal relation between the financial variables and the valuation ratio indicated treatment in separate models which will be continued here. Second, while the employment of fine industry classifications was indicated by the large inter-industry variations in performance, the results showed neither any general improvement when variables were related to appropriate industry averages nor any indication of patterns in whether an industry would fit or fail to fit the theoretically anticipated relationship. Ignoring the industry classes by taking all firms together into a univariate analysis will undoubtedly have the effect of reintroducing considerable ‘noise’ into the analysis.