This study tests the validity of the Belgian Ooghe-Joos-De Vos (1991) failure prediction models (1 and 3 years prior to failure) across 18 different industries and different size classes. Firstly, the performance results and the trade-off functions reveal a wide range of performances for the different industries. However, we notice that the OJD models perform best for the classical manufacturing industries and financial services, while they show the worst performance results for the service industries and the no-industry category. Furthermore, when using new, industry specific cut-off points, the error rates of the models are significantly reduced. Secondly, the OJD model 1 year prior to failure seems to perform best for large companies and companies with complete form annual accounts. Finally, the performance differences between the various subgroups with respect to industry, size class and form of annual account of the model 3 years prior to failure the are much smaller than those of the model 1 year prior to failure.
De Langhe, Tine; Ooghe, Hubert (Vlerick Business School, 2001)
Few studies have addressed the performance of smaller unquoted companies involved in take-overs, especially in the Continental European countries. Therefore this study addresses the post-take-over financial characteristics of privately held companies involved in 143 Belgian take-overs between 1992 and 1994. Specifically, this paper examines the financial performance of the acquiring firm after the take-over, using statistical analysis of industry-adjusted variables. Our findings show that following the take-over, the profitability, the solvency and the liquidity of most of the combined companies decline. This decline is also reflected in the failure prediction scores. With respect to the added value, take-overs are found to be accompanied by increases in the labour productivity, caused by the general improvement of gross added value per employee of Belgian companies in the last ten years and partly caused by laying off the target's workers. So it seems that, contrary to the general expectations and beliefs, take-overs usually do not seem to improve the acquirer's financial performance.
Ooghe, Hubert; Camerlynck, Jan (Vlerick Business School, 2001)
This study addresses the pre-acquisition financial characteristics of privately held acquiring and acquired companies involved in 143 Belgian takeovers between 1992 and 1994. Specifically, the research examines the profitability, liquidity, financial structure, added value and failure risk using statistical analysis of industry-adjusted variables. Our findings show that acquisition is not an alternative to bankruptcy since acquired companies do not report high failure risk, but exhibit higher than industry liquidity and solvency. The acquirers achieve a higher growth rate in total assets and sales than the acquired firms but experience a negative industry-adjusted liquidity and are highly levered, suggesting evidence for a growth-resource mismatch or a financial fit between acquirers and their targets.
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