Predicting merger targets of hospitality firms (a Logit model)

Abstract

The study investigates differentiating characteristics of merger target firms in the hospitality industry. A Binomial Logit Analysis Model to predict merger targets is developed and empirically estimated. Among nine company attributes which are hypothesized to be important factors in predicting merger targets, four are found to be significant. Back-testing of the model’s ability to correctly predict merger targets shows a high success ratio with statistically significant results at the usually accepted level. This suggests that a formal model like this can be used by practitioners as a supplementary decision-supporting tool for identifying companies with a high likelihood of being merger targets.