Forthcoming, web supplement to Journal of Financial and Quantitative Analysis, 2003 The Disciplinary Motive for Takeovers: A Review of the Empirical Evidence

This paper reviews the literature on the disciplinary motive for takeovers, also known as the inefficient management hypothesis. A number of papers have examined either stock return performance, operating performance or q-ratios prior to acquisition, both for target firms as a whole and for specific sub-samples that are likely to be disciplinary. Other research has attempted to predict the probability of takeover from past performance. Overall, we do not find much empirical evidence in support of the disciplinary motive for takeovers