They would like to acknowledge helpful comments received from colleagues at UNSW on earlier drafts of the paper and detailed comments made by the anonymous referee, which have greatly improved the paper. Yawson acknowledges financial support form the Sir Halley Stewart Trust. Naturally, with respect to the paper, the usual caveat applies.
Are Corporate Restructuring Events Driven by Common Factors? Implications for Takeover Prediction
Version of Record online: 15 JUN 2007
Journal of Business Finance & Accounting
Volume 34, Issue 7-8, pages 1169–1192, September/October 2007
How to Cite
Powell, R. and Yawson, A. (2007), Are Corporate Restructuring Events Driven by Common Factors? Implications for Takeover Prediction. Journal of Business Finance & Accounting, 34: 1169–1192. doi: 10.1111/j.1468-5957.2007.02028.x
- Issue online: 15 JUN 2007
- Version of Record online: 15 JUN 2007
- (Paper received September 2005, revised version accepted January 2007)
- corporate restructuring;
- type II error
Abstract: The paper shows that variables commonly used in takeover prediction models also help to explain the likelihood of several other restructuring events, including divestitures, bankruptcies and significant employee layoffs. This finding helps to explain the larger misclassification errors in binomial takeover prediction models commonly used in prior research. The results show that modelling takeover prediction models in a binomial setting is likely to lead to misspecification in the parameter estimates and, further, result in erroneous conclusions about the determinants of takeover likelihood. The paper shows that controlling for other restructuring events by using a multinomial framework results in consistently lower misclassification errors in out-of-sample prediction tests, when compared to the benchmark of a typical binomial model.