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The Determinants of Takeovers: Recent Evidence from U.S. Thrifts

Authors: Cebenoyan, Fatma
Cebenoyan, A. Sinan
Cooperman, Elizabeth S.
Keywords: Cost Inefficiency;Depository Institutions;Thrifts;Takeovers
Issue Date: 10-Dec-2002
Series/Report no.: FIN-02-058
Abstract: This paper uses a two-step methodology to examine the relationship between managerial cost inefficiency and the takeover of U.S. thrifts during a period of market liberalization and widespread takeover activity, 1994 to 2000. In the first stage using stochastic cost frontiers, we estimate controllable managerial cost inefficiency scores for all stock firms operating each year in 1994 to 2000. In a second stage, we use these scores to examine correlates of takeovers, focusing on cost inefficiency. For takeovers by banks, we find a significant negative relationship between cost inefficiency and takeover, suggesting an exit of more cost efficient firms from the thrift industry during this period. However, takeovers by thrifts are associated with other characteristics.
Appears in Collections:Finance Working Papers

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