Inflation, Firm Control-Type and Vulnerability to Takeover

D R Chapman and C W Junor

Oxford Economic Papers, 1987, vol. 39, issue 3, 500-15

Abstract: This paper brings together three aspects of the theory of the firm as a takeover victim: inflation adjustment of perfromance data, the rel ationship between performance and vulnerability to takeover, and the role of control type. Using a sample of Australian industrial compani es, this study identifies failure to revalue assets as an indicator o f the likelihood of takeover. Partitioning firms into owner and manag er control types establishes different behavior of the inflation-adju sted valuation ratio of the two groups. Some insights are thereby gained into the factors which make manager-controlled fir ms differ among themselves in their critical valuation ratios. Copyright 1987 by Royal Economic Society.

Date: 1987
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