Prediction of distress and identification of potential M&As targets in UK

Autor: Dionysios Polemis, Dimitrios Gounopoulos
Rok vydání: 2012
Předmět:
Zdroj: Polemis, D & Gounopoulos, D 2012, ' Prediction of distress and identification of potential M &As targets in UK ', Managerial Finance, vol. 38, no. 11, pp. 1084-1104 . https://doi.org/10.1108/03074351211266801
ISSN: 0307-4358
DOI: 10.1108/03074351211266801
Popis: Purpose This study seeks to identify financial characteristics that can be employed to assess and predict corporate financial distress in publicly traded firms quoted in the London Stock Exchange. Design/Methodology/Approach The model incorporates three existing literatures as an alternative to bankruptcy. The model has two stages: the first stage discriminates financially healthy or distressed firms utilizing Binary Logit Regression while in the second stage with the use of the univariate analysis, firms are further categorized into four possible outcomes: financially healthy, potentially healthy targets and financially distressed or potentially distressed acquisition targets. Findings It was found that financial distress could be identified even three years prior the event. Moreover, statistical significant differences were found between the four firm sample groups. Research limitations / implications The vast changing environment and the financial crisis, highlight the need for future research on the area that will consider the world trade implications along with the individual macroeconomic variables of each country. Originality / Value It is the first time that a model is developed for the United Kingdom to follow the hazard model’s procedure based on recent financial data. Moreover, due to the scope of the analysis, a new version of the latter procedure is employed. A further innovation that makes the produced model unique is its ability to classify a firm into one of several a priori groupings according to the latter’s individual characteristics. This overcomes the limitation of earlier studies that considered only two possible outcomes for firms.
Databáze: OpenAIRE