PREDICTION OF GREEK COMPANY TAKEOVERS VIA MULTIVARIATE-ANALYSIS OF FINANCIAL RATIOS

This case study evaluates the financial features of Greek firms that w ere taken over during the period 1983-1990. A sample of acquired firms and a sample of equivalent non-acquired firms are considered with the objective of distinguishing between them, based upon their difference s in sixteen financial characteristics 1-3 years prior to each takeove r. Linear and quadratic discriminant analysis and logit models are dev eloped with factor analysis input. Prediction results are mixed, mainl y due to the similar financial ratio profiles between acquired and non -acquired firms. Most models classify correctly a significant proporti on of acquired or non-acquired firms, but not both (with one exception ). The only model that provides significantly correct predictions for both acquired and non-acquired firms in either the calibration or hold out sample is a linear discriminant function with six financial ratios (two from each of the three years prior to takeover). The reasons for these modelling difficulties are discussed.