Determinants of being acquired in Indian manufacturing sector: a panel data analysis

Abstract

Purpose

The purpose of this study is to examine the firms’ determinants of being acquired in Indian manufacturing sector. There is evidence of relationship between likelihood of being acquired and several firm specific characteristics such as age, size, research and development (R&D), advertising intensity, productivity, leverage, profitability, intangible assets and financial constraints. However, little is known about the association between these characteristics and likelihood of acquisition in Indian manufacturing sector.

Design/methodology/approach

The sample is a panel of 2,189 Indian manufacturing firms spanning almost 10 years (1998-2007). Random effects logistic (REL) regression model is adopted to control the firm specific unobserved heterogeneity in the sample. This is an essential requirement for providing accurate and effective determinants of being acquired.

Findings

Empirical results reveal that the determinants of being acquired in Indian manufacturing sector are age, size, R&D intensity, advertising intensity, productivity and leverage. The findings indicate that increase in firms’ age, size, R&D intensity and advertising intensity increases the likelihood of being acquired. However, increase in productivity and leverage decreases the likelihood of being acquired.

Research limitations/implications

Findings of this study may be useful for potential targets to arrive at more thoughtful assessment of their attractiveness and, accordingly, promote their acquisition as a more efficient mode of exit.

Originality/value

The paper contributes some empirical evidence on the determinants of being acquired in Indian manufacturing sector by using panel data and REL regression model.

Citation

Irfan, M., Saha, S. and Singh, S.K. (2016), "Determinants of being acquired in Indian manufacturing sector: a panel data analysis", Journal of Indian Business Research, Vol. 8 No. 4, pp. 246-263. https://doi.org/10.1108/JIBR-11-2015-0118