Ownership, Board Characteristics and Non-Hostile Take-Overs in the UK: An Empirical and Predictive Analysis

Abstract

This paper analyses the corporate governance mechanisms of a sample of companies that have been acquired by friendly take-over and those of a matching control sample that have not. It also uses a holdout sample to assess the model's ability to correctly classify take-over candidates. The results show that the targets were poor performers and that there are significant governance differences between the friendly take-over targets and the control sample. The inclusion of governance characteristics enables the model to differentiate between target and non-target companies when predicting acquisition probability.

Keywords: Corporate governance; The market for corporate control; Cadbury Committee; Board independence; Friendly takeovers; Hostile takeovers; Model prediction; Ownership; Firm performance; Firm age; Director quality; UK, small quoted companies

JEL Classification: D21, G32, G34, L21