WHICH FIRMS ACQUIRE? DETERMINANTS OF ACQUISITIONS

Vusal Eminli
University of the Pacific

ABSTRACT

This study investigates predictors of being an acquiring firm. Employing several
variables deemed to have an impact on the likelihood of becoming an acquirer, such as firm beta,
Tobin’s Q, leverage, liquidity, size, earnings, sales, cash flows, and R&D expenditures and
controlling for fixed-effects, it was found that firm specific risk as measured by beta and Tobin’s
Q are strong predictors of a firm pursuing an acquisition. These results support the efficiency
argument and the agency theory of merger motives.

Keywords: Mergers, acquisitions, acquisition determinants