Takeovers, institutional investment and the persistence of profits

Andy Cosh, Alan Hughes, Kevin Lee (kevin.lee@nottingham.ac.uk) and Ajit Singh

MPRA Paper from University Library of Munich, Germany

Abstract: This paper studies the impact of takeovers on the profitability of the participating companies and the influence of institutional investors on this process. It involves an original approach to assessing the profitability impact by modelling the dynamics of corporate profitability. It is shown that the standard counterfactual assumptions made in most merger effect studies are biased against finidng profit-enhancing merger effects where acquiring firms display above average profitabiltiy prior to the merger. On the other hand, acquisition is shown to reinforce the tendency amongst companies for their profitability to move towards industry norms over time.

Keywords: company takeover; insitutional investors; company profitability (search for similar items in EconPapers)
JEL-codes: G3 G34 L0 (search for similar items in EconPapers)
Date: 1996-03
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Citations: View citations in EconPapers (1)

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