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The process of corporate restructuring through mergers and acquisitions has occupied much relevance in post-liberalization period. The financial characteristics of a firm play a critical role in the merger decision process. This study analyses the distinctive financial characteristics of the acquirer and the target firms in the period of merger. In addition, the empirical challenge is to determine the measurable factors that make a firm attractive as a takeover target. The fundamental research focus is on the characteristics that make a firm an acquirer and on identifying those characteristics of a firm, which will have a significant impact on the probability that firms will be acquired. The ratios involved in the study were reflective of the financial and product market characteristics. The sample firms consisting of 227 acquirer and 215 target firms represented the mergers during the period 1993—2004. The distinctive characteristics of the acquirer and the target firms were analysed with Mann Whitney U test and Kolgomorov Smirnov test on the assumption of non-normality of the sample distribution. The final step involved using the logit regression to examine the likelihood that a given firm will be the target of an acquisition attempt. The same sample of target firms merged between 1993-2004 period and a random sample of 490 non-acquired firms based on a matched industry sector and similar size (sales) are obtained for the logit model estimation. The comparative study of the acquirer and the target firms in the year of merger and the logit analysis reveals the following: The size of the target firms was much smaller compared to the acquirer firms. The acquirer firms have higher cash flow, higher PE ratios, higher book value, higher liquid assets, and lower debt to total assets ratio, which are statistically significant when compared to the target firms. Some evidence points out higher leverage for the target firms especially for measures of market leverage. The lesser the liquidity position, greater the probability of a firm becoming a target. The larger firms are less likely to become acquisition targets. Logit coefficients are consistent with the size hypothesis and inefficient management hypothesis. The advertising intensity ratio and the cash flow to market value of assets show statistical significance based on logit results. The results of the study indicate that firms generating free cash flows and having low debt levels have a tendency to incur agency costs. Capital structure characteristics provide the acquirers and the target firms a motive for mergers. The acquirer firms with unused debt capacity can use mergers as a strategic business tool for gaining financial synergy.

PurposeIn this paper, the authors aim to investigate the short‐run as well as long‐run market efficiency of Indian commodity futures markets using different asset pricing models. Four agricultural (soybean, corn, castor seed and guar seed) and seven non‐agricultural (gold, silver, aluminium, copper, zinc, crude oil and natural gas) commodities have been tested for market efficiency and unbiasedness.Design/methodology/approachThe long‐run market efficiency and unbiasedness is tested using Johansen cointegration procedure while allowing for constant risk premium. Short‐run price dynamics is investigated with constant and time varying risk premium. Short‐run price dynamics with constant risk premium is modeled with ECM model and short‐run price dynamics with time varying risk premium is modeled using ECM‐GARCH in‐Mean framework.FindingsAs far as long‐run efficiency is concerned, the authors find that near month futures prices of most of the commodities are cointegrated with the spot prices. The cointegration relationship is not found for the next to near months futures contracts, where futures trading volume is low. The authors find support for the hypothesis that thinly traded contracts fail to forecast future spot prices and are inefficient. The unbiasedness hypothesis is rejected for most of the commodities. It is also found that for all commodities, some inefficiency exists in the short run. The authors do not find support of time varying risk premium in Indian commodity market context.Originality/valueIn context of Indian commodity futures markets, probably this is the first study which explores the short‐run market efficiency of futures markets in time varying risk premium framework. This paper also links trading activity of Indian commodity futures markets with market efficiency.

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