Management motives for takeovers in the petroleum industry

Abstract

This paper tests the proposition that takeovers involving major petroleum companies are due to poor management performance by the target companies. Among the performance variables used to distinguish firms subject to takeover were the following: the ratio of market value to book value, rate of return, dividend payout ratio, reserve replacement ratio, and finding costs. The results do not indicate that there is a clear cut distinction between the firms that were taken over and those that were not. As a result, the managerial incompetence hypothesis receives no support from this analysis.