23 Whileithastakenalittlelongerintherestofthe
world, activist investors are now part of the
investment landscape in more and more countries.- Nothing changes the perceptions of management
vulnerability to an outside challenge more than a
well-publicized hostile takeover or the ouster of a
CEOofalargefirminthesamemarket.Inthelate
1990s, for instance, the hostile acquisition of
Telecom Italia by Olivetti changed the perception
that the managers at large European firms were
immune to stockholder challenges.
Estimating the Probability of Management Change
Whilethedeterminantsofmanagementchangecanbelisted,
it is far more difficult to quantitatively estimate the
probabilitythatitwilloccur.Onestatisticalapproachthatis
promisingisalogitorprobit,whereweassesstheprobability
ofmanagementchange bycontrastingthecharacteristicsof
firmswheremanagementhaschangedinthepastwithfirms
where thathasnot occurred.Researchers haveappliedthis
technique to look at both acquisitions and forced CEO
change.
Inoneofthefirstpaperstoassessthelikelihoodoftakeovers
bycomparingtargetfirmsinacquisitionstofirmsthatwere
nottargets,Palepu(1986)notedthattargetfirmsintakeovers
were smaller than nontarget firms and invested inefficiently.
24 Ina laterpaper,North(2001)concludedthatfirmswith
low insider/managerial ownership were more likely to be
targeted in acquisitions.
25 Neitherpaperspecificallyfocusedonhostileacquisitions,
though. Nuttall (1999) found that target firms in hostile