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5354 BARTLEY AND BOARDMAN mathematical models that are useful to investors. For example, Ketz (1978); Norton and Smith (1979) and Mensah (1983) developed bankruptcy prediction models using inflation adjusted data. Of these, only Ketz (1978) found evidence that inflation adjusted data are of greater usefulness than H C data. Baran et al. (1980a) found that CD data are useful for the estimation of systematic market risk, although their findings were disputed by Samuelson and Murdoch (1985). Bar-Yosef and Lev (1983) found no evidence that inflation adjusted accounting data convey useful information about a company's dividend decisions. In contrast, Baran et al. (1980b) and Yang and Vasarhelyi (1985) found that inflation adjusted data could be used to explain bond ratings.In the present study, the usefulness of SFAS 33 disclosures is examined in the context of developing mathematical models that can help investors predict whether a company will be subject to a takeover attempt. Models of this type are of potential value to investors because investments in target companies earn large positive abnormal returns when a merger or tender offer is announced (Jensen and Ruback, 1983).4 In fact, Wansley et al. (1983) demonstrated that a multiple discriminant analysis (MDA) model using H C financial data could predict takeovers with sufficient accuracy for an investor to earn abnormal security returns by investing in companies identified by the model. T H E PREDICTION O F TAKEOVER ATTEMPTS Numerous studies have used financial accounting data as the basis for predicting whether companies will be subject to takeovers or takeover attempts. Prominent examples of studies conducted in the United States and Great Britain include Simkowitz and Monroe (1971); Singh (1971); Nielsen and Melicher (1973); Stevens (1973); Firth (1976); Harris et al. (1983); Wansley et al. (1983); Hasbrouck (1985); Palepu (1986); and Bartley and Boardman (1986). The motivations for these studies include developing classrficatory models for use as investment tools and obtaining a better understanding of the motivations for takeovers. Bartley and Boardman (1986) provide the only direct comparison of inflation adjusted data and HC data in the context of takeover classification. Their primary objective was to determine if the ratio of a company's market value to its inflation adjusted book value (the valuation ratio) leads to more accurate classification of takeover targets than the HC measure of the same ratio. They found that replacing the HC valuation ratio with an inflation adjusted valuation ratio increased the classificatory accuracy of MDA modrls using traditional HC data for the other financial variables. In a similar study, Hasbrouck (1985) also found that the ratio of market value to inflation adjusted book value was important in predicting takeover attempts.The various motives for takeovers suggest a variety of financial characteristics possessed by the ideal target company. Hypothesized motivations for takeovers INFLATION ADJUSTED DATA AND CORPORATE...

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