Takeover, Distress, and Equity Issuance: Evidence from Korea

We study the motive and the economic effects of takeover in Korea, which has not been actively studied due to difficulties in collecting data. Using the data of largest shareholder change disclosed in the Korea Exchange's public disclosure system in 2004-2017, we estimate logit regressions of the likelihood that the firms to be a target. We also estimate panel regressions to examine the effect of takeovers on financial performances. The results show that takeovers in Korea occur in relation to financial distress, and that some companies tend to be targeted repeatedly. However, after the takeover, the financial distress is not resolved, indicating poor performance of takeovers motivated by financial distress.