DETERMINANTS OF MERGER-BANKRUPTCY CHOICES IN FINANCIALLY TROUBLED FIRMS.
Item
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Title
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DETERMINANTS OF MERGER-BANKRUPTCY CHOICES IN FINANCIALLY TROUBLED FIRMS.
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Identifier
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AAI8401936
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identifier
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8401936
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Creator
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ISMAIL, ZAKARIA MOHAMED EL-SADEK.
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Contributor
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Victor Pastena | Sidney Lirtzman
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Date
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1983
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Language
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English
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Publisher
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City University of New York.
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Subject
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Business Administration, Accounting
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Abstract
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The objectives of this study were to analyze theoretically and test empirically the following three important research questions: (1) to what extent the avoidance bankruptcy theory is the rational explanation for the merger movement in recent years? (2) given the validity of the avoidance bankruptcy theory as motivation for the merger movement, what are the accounting and economics determinants of merger-voluntary bankruptcy choices for the financially troubled firms? and (3) given the legal and financing constraints of Chapter XI, what are the accounting and economics determinants of Chapter XI firms outcomes?;The analysis of data indicated that the avoidance bankruptcy theory is a rational explanation for the merger movement in recent years. By utilizing the Z-Score Model {lcub}Altman, 1968{rcub}, 106 out of the 399 firms (26.6 percent) which completed their mergers from 1969 through 1978 were found to be failing firms one year before the mergers.;For analysis of the second research question, the study established a framework for merger-voluntary bankruptcy choices model and then tested this model empirically by using both N-Chotomous Probit Analysis (NPA) and Multiple Discriminant Analysis (MDA). The model's findings suggest that there is positively a correlation between tax loss carryovers, executive stock options and stock ownership and merger choice, while there is positively a correlation between financial leverage and voluntary bankruptcy choice. This empirical evidence is consistent with the hypotheses developed in this study. Revenue is the only variable that was in the wrong direction. The NPA model is extremely significant at the highest level (.001 or better). The overall accuracy of the NPA, classification matrix and jackknifed classification range from 73 percent to 80 percent. This classification success exceeds those achieved by either naive model.;Finally, the Chapter XI outcomes model was established. Size, financial leverage, tax loss carryovers and executive stock options have an influence on outcomes of firms which filed for Chapter XI.;The general conclusion of this study is that the accounting numbers based on the traditional historical approach are useful to economics decisions in internal organization.
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Type
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dissertation
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Source
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PQT Legacy CUNY.xlsx
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degree
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Ph.D.
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Program
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Busines
