Prelude to a merger: Predicting a merger with financial characteristics
This dissertation utilizes survival analysis methods to describe time-to-event data, where the event is a merger executed by a publicly traded pharmaceutical firm with a current market capitalization of $10 billion or more. The Cox proportional hazards model, the analytical method used to summarize relationships between characteristics of the acquiring firms—including financial, balance sheet and operational measures and indices of efficiency—and the likelihood of a merger event, has never been previously utilized in the merger and acquisition (M&A) literature. Furthermore, the majority of the existing M&A literature examines the characteristics of the target firms at a fixed point in time whereas the current analysis examines characteristics of the acquiring firms both at a fixed point of time and as time-varying measures and accounts for the interval of time until a first merger or the interval of time between mergers. Additional analyses summarize short-term changes in commonly used measures of efficiency in the period immediately preceding and immediately following a merger event and long-term changes in these measures among the firms that engaged in mergers over time. Univariate Cox regression models find statistically significant relationships between net income, operating income, SG&A, and total shareholder equity. Multivariate Cox regression models reveal total shareholder equity as the main driver of merger activity. This finding is consistent with one popular theory found in the literature that firms seek to maximize their shareholder's wealth. The analyses of short-term and long-term changes in measures of efficiency did not reveal any notable changes, suggesting that the mergers did not have a substantial negative or positive effect on efficiency over time. These analyses extend on the existing literature that has examined the characteristics of firms that engage in mergers and the short- and long-term impact of mergers on the acquiring companies. ^
Economics, General|Economics, Finance
"Prelude to a merger: Predicting a merger with financial characteristics"
(January 1, 2005).
ETD Collection for Fordham University.