Prediction of Greek takeover targets via bootstrapping on mixed logit model

The main purpose of this study is to examine the possibility of prediction of Greek takeover targets that belong to the industrial sector, emphasizing the econometric methodology and the prediction test.

The study uses a sample of 51 targets and 290 non‐targets exclusively from Greek industry over the period 1997‐2005. In order to achieve a better predictive accuracy the paper uses a new econometric methodology, the bootstrap mixed logit and different (more advanced) techniques of prediction test and choice of cutoff values.

The results exhibit that bootstrap mixed logit has significant and valuable predictive ability with respect to the classical conditional logit model. Furthermore, the predictive accuracy is higher than the results of other studies (e.g Palepu and Espahbodi and Espahbodi).

The main contribution of this study is the application of the bootstrap mixed logit in analyzing Greek takeovers. The results change the prediction variables as well as the determinants of the takeover target characteristics for the Greek industry. This is meaningful, not only for the investors that seek to increase the value of their fortune through acquisitions, but also for the managers that can detect if their firm might be considered a takeover target.