Motivation and Outcome of Malaysian Takeovers: An International Perspective

Abstract

This paper examines the potential motives and effects of corporate takeovers that occurred in Malaysia during the period 1980 through 1993. The Mueller's methodology, which has been adopted for Australia, USA, UK, and five European countries, is employed in order to provide an analysis of the Malaysian takeovers on an international perspective. The findings indicate that the Malaysian takeovers were motivated by size, growth, and profit considerations, and supported by the desire of having a balanced leverage, thus favouring the eclectic theory of takeovers. In terms of the outcomes, the paper finds that the acquiring firms have achieved larger size at the expense of reduced profits both for themselves and the acquired firms. In contrast to other countries, the bidder firms in Malaysia, in general, have lower profitability, higher risk, and lower leverage vis-a-vis the control bidder firms. Also, in Malaysia, the target firms have significantly better pre-takeover growth and profit performance than the control target firms, which is quite the opposite in other countries.