Takeover Prediction as a Portfolio Strategy

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School of Business | Master's thesis
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Date
2018
Major/Subject
Mcode
Degree programme
Finance
Language
en
Pages
71 + 11
Series
Abstract
In this study, I have tested several takeover prediction theories by using a logistic regression model. The results suggest that takeover targets have common characteristics such as small size, low Tobin’s Q and high return on assets. In addition, the growth-resource mismatch theory is supported. Furthermore, the takeover prediction model is used to develop an investment strategy. However, because takeover targets and distressed companies tend to have common characteristics, the strategy is developed based on a combination of a statistical takeover prediction model and the distance to default model. The strategy is tested by using different portfolio sizes and default probability constraints. As a result, the investment strategy is found to produce statistically significant abnormal returns.
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Thesis advisor
Nyberg, Peter
Keywords
takeover prediction, default prediction, market timing, abnormal returns, portfolio strategy
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