Hostname: page-component-89b8bd64d-shngb Total loading time: 0 Render date: 2026-05-09T06:25:10.157Z Has data issue: false hasContentIssue false
  • English
  • Français

Antitakeover Provisions and Shareholder Wealth: A Survey of the Literature

Published online by Cambridge University Press:  12 September 2014

Miroslava Straska  and
H. Gregory Waller
Miroslava Straska
Affiliation:
mstraska@vcu.edu, School of Business, Virginia Commonwealth University, 301 W Main St, Richmond, VA 23220.
H. Gregory Waller
Affiliation:
hgwaller@vcu.edu, School of Business, Virginia Commonwealth University, 301 W Main St, Richmond, VA 23220.
Get access Rights & Permissions [Opens in a new window]

Abstract

We survey theoretical and empirical research on antitakeover provisions, focusing on the relation between antitakeover provisions and shareholder value. We divide the empirical studies based upon the evidence that they provide: short-term event studies, studies on performance and policy changes around adopting antitakeover provisions or passing state antitakeover laws, studies on the impact of antitakeover provisions on takeovers, studies on the relation between antitakeover provisions and firm characteristics, and long-term studies on the relation between antitakeover provisions and firm performance or policies. We also discuss the place of antitakeover provisions in the current debate about “good governance” practices.

Information

Type
Research Articles
Information
Journal of Financial and Quantitative Analysis , Volume 49 , Issue 4 , August 2014 , pp. 933 - 956
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2014 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Article purchase

Temporarily unavailable

References

Atanassov, J. “Do Hostile Takeovers Stifle Innovation? Evidence from Antitakeover Legislation and Corporate Patenting.” Journal of Finance, 68 (2013), 1097–1131.Google Scholar
Bates, T. W.; Becher, D. A.; and Lemmon, M. L.. “Board Classification and Managerial Entrenchment: Evidence from the Market for Corporate Control.” Journal of Financial Economics, 87 (2008), 656–677.Google Scholar
Bebchuk, L. A., and Cohen, A.. “The Costs of Entrenched Boards.” Journal of Financial Economics, 78 (2005), 409–433.Google Scholar
Bebchuk, L. A.; Cohen, A.; and Ferrell, A.. “What Matters in Corporate Governance?” Review of Financial Studies, 22 (2009), 783–827.Google Scholar
Bebchuk, L. A.; Cohen, A.; and Wang, C. C. Y.. “Learning and the Disappearing Association between Governance and Returns.” Journal of Financial Economics, 108 (2013), 323–348.Google Scholar
Bertrand, M., and Mullainathan, S.. “Is There Discretion in Wage Setting? A Test Using Takeover Legislation.” RAND Journal of Economics, 30 (1999), 535–554.Google Scholar
Bertrand, M., and Mullainathan, S.. “Enjoying the Quiet Life? Corporate Governance and Managerial Preferences.” Journal of Political Economy, 111 (2003), 1043–1075.Google Scholar
Bhagat, S., and Jefferis, R. H.. “Voting Power in the Proxy Process: The Case of Antitakeover Charter Amendments.” Journal of Financial Economics, 30 (1991), 193–225.Google Scholar
Bhagat, S.; Bolton, B.; and Romano, R.. “The Promise and Peril of Corporate Governance Indices.” Columbia Law Review, 108 (2008), 1803–1882.Google Scholar
Borokhovich, K. A.; Brunarski, K. R.; and Parrino, R.. “CEO Contracting and Antitakeover Amendments.” Journal of Finance, 52 (1997), 1495–1517.Google Scholar
Boyle, G. W.; Carter, R. B.; and Stover, R. D.. “Extraordinary Antitakeover Provisions and Insider Ownership Structure: The Case of Converting Savings and Loans.” Journal of Financial and Quantitative Analysis, 33 (1998), 291–304.Google Scholar
Brickley, J. A.; Coles, J. L.; and Terry, R. L.. “Outside Directors and the Adoption of Poison Pills.” Journal of Financial Economics, 35 (1994), 371–390.Google Scholar
Caton, G. L., and Goh, J.. “Corporate Governance, Shareholder Rights, and Shareholder Rights Plans: Poison, Placebo, or Prescription?” Journal of Financial and Quantitative Analysis, 43 (2008), 381–400.Google Scholar
Chen, K. C. W.; Chen, Z.; and Wei, K. C. J.. “Agency Costs of Free Cash Flow and the Effect of Shareholder Rights on the Implied Cost of Equity Capital.” Journal of Financial and Quantitative Analysis, 46 (2011), 171–207.Google Scholar
Cheng, S.; Nagar, V.; and Rajan, M. V.. “Identifying Control Motives in Managerial Ownership: Evidence from Antitakeover Legislation.” Review of Financial Studies, 18 (2004), 637–672.CrossRefGoogle Scholar
Chi, D. “Understanding the Endogeneity between Firm Value and Shareholder Rights.” Financial Management, 34 (2005), 65–76.Google Scholar
Coates, J. C IV. “Takeover Defenses in the Shadow of the Pill: A Critique of the Scientific Evidence.” Texas Law Review, 79 (2000), 271–382.Google Scholar
Comment, R., and Schwert, G. W.. “Poison or Placebo? Evidence on the Deterrence and Wealth Effects of Modern Antitakeover Measures.” Journal of Financial Economics, 39 (1995), 3–43.Google Scholar
Core, J. E.; Guay, W. R.; and Rusticus, T. O.. “Does Weak Governance Cause Weak Stock Returns? An Examination of Firm Operating Performance and Analysts’ Expectations.” Journal of Finance, 61 (2006), 655–687.CrossRefGoogle Scholar
Cotter, J. F.; Shivdasani, A.; and Zenner, M.. “Do Independent Directors Enhance Target Shareholder Wealth during Tender Offers?” Journal of Financial Economics, 43 (1997), 195–218.Google Scholar
Cremers, K. J. M., and Nair, V. B.. “Governance Mechanisms and Equity Prices.” Journal of Finance, 60 (2005), 2859–2894.Google Scholar
Cremers, K. J. M.; Nair, V. B.; and John, K.. “Takeovers and the Cross-Section of Returns.” Review of Financial Studies, 22 (2009), 1409–1446.Google Scholar
Cremers, K. J. M.; Nair, V. B.; and Wei, C.. “Governance Mechanisms and Bond Prices.” Review of Financial Studies, 20 (2007), 1359–1388.Google Scholar
Cunat, V.; Gine, M.; and Guadalupe, M.. “The Vote Is Cast: The Effect of Corporate Governance on Shareholder Value.” Journal of Finance, 67 (2012), 1943–1977.Google Scholar
Daines, R. “Does Delaware Law Improve Firm Value?” Journal of Financial Economics, 62 (2001), 525–558.Google Scholar
Daines, R. M.; Gow, I. D.; and Larcker, D. F.. “Rating the Ratings: How Good Are Commercial Governance Ratings?” Journal of Financial Economics, 98 (2010), 439–461.Google Scholar
Daines, R., and Klausner, M.. “Do IPO Charters Maximize Firm Value? Antitakeover Protection in IPOs.” Journal of Law Economics & Organization, 17 (2001), 83–120.Google Scholar
Danielson, M. G., and Karpoff, J. M.. “On the Uses of Corporate Governance Provisions.” Journal of Corporate Finance, 4 (1998), 347–371.Google Scholar
Danielson, M. G., and Karpoff, J. M.. “Do Pills Poison Operating Performance?” Journal of Corporate Finance, 12 (2006), 536–559.Google Scholar
DeAngelo, H., and Rice, E. M.. “Antitakeover Charter Amendments and Stockholder Wealth.” Journal of Financial Economics, 11 (1983), 329–360.Google Scholar
Dittmar, A., and Mahrt-Smith, J.. “Corporate Governance and the Value of Cash Holdings.” Journal of Financial Economics, 83 (2007), 599–634.Google Scholar
Faleye, O. “Classified Boards, Firm Value and Managerial Entrenchment.” Journal of Financial Economics, 83 (2007), 501–527.Google Scholar
Ferreira, M. A., and Laux, P. A.. “Corporate Governance, Idiosyncratic Risk, and Information Flow.” Journal of Finance, 62 (2007), 951–989.Google Scholar
Field, L. C., and Karpoff, J. M.. “Takeover Defenses of IPO Firms.” Journal of Finance, 57 (2002), 1857–1889.Google Scholar
Garvey, G. T., and Hanka, G.. “Capital Structure and Corporate Control: The Effect of Antitakeover Statutes on Firm Leverage.” Journal of Finance, 54 (1999), 519–546.Google Scholar
Gillan, S. L., and Starks, L. T.. “Corporate Governance Proposals and Shareholder Activism: The Role of Institutional Investors.” Journal of Financial Economics, 57 (2000), 275–305.Google Scholar
Giroud, X., and Mueller, H. M.. “Does Corporate Governance Matter in Competitive Industries?” Journal of Financial Economics, 95 (2010), 312–331.Google Scholar
Giroud, X., and Mueller, H. M.. “Corporate Governance, Product Market Competition, and Equity Prices.” Journal of Finance, 66 (2011), 563–600.Google Scholar
Gompers, P.; Ishii, J.; and Metrick, A.. “Corporate Governance and Equity Prices.” Quarterly Journal of Economics, 118 (2003), 107–156.CrossRefGoogle Scholar
Grossman, S. J., and Hart, O. D.. “Takeover Bids, the Free-Rider Problem, and the Theory of the Corporation.” Bell Journal of Economics, 11 (1980), 42–64.Google Scholar
Guo, R.; Kruse, T. A.; and Nohel, T.. “Undoing the Powerful Anti-Takeover Force of Staggered Boards.” Journal of Corporate Finance, 14 (2008), 274–288.Google Scholar
Harford, J.; Humphery-Jenner, M.; and Powell, R.. “The Sources of Value Destruction in Acquisitions by Entrenched Managers.” Journal of Financial Economics, 106 (2012), 247–261.Google Scholar
Harford, J.; Mansi, S. A.; and Maxwell, W. F.. “Corporate Governance and Firm Cash Holdings in the US.” Journal of Financial Economics, 87 (2008), 535–555.Google Scholar
Harris, E. G. “Antitakeover Measures, Golden Parachutes, and Target Shareholder Welfare.” RAND Journal of Economics, 21 (1990), 614–625.Google Scholar
Heron, R. A., and Lie, E.. “On the Use of Poison Pills and Defensive Payouts by Takeover Targets.” Journal of Business, 79 (2006), 1783–1807.Google Scholar
Jahera, J. S. Jr., and Pugh, W.. “State Takeover Legislation: The Case of Delaware.” Journal of Law, Economics, & Organization, 7 (1991), 410–428.Google Scholar
Jarrell, G. A., and Poulsen, A. B.. “Shark Repellents and Stock Prices: The Impact of Antitakeover Charter Amendments Since 1980.” Journal of Financial Economics, 19 (1987), 127–168.Google Scholar
Jensen, M. C., and Meckling, W. H.. “Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure.” Journal of Financial Economics, 3 (1976), 305–360.Google Scholar
Jensen, M. C., and Ruback, R. S.. “The Market for Corporate Control.” Journal of Financial Economics, 11 (1983), 5–50.Google Scholar
Johnson, S. A.; Moorman, T. C.; and Sorescu, S.. “A Reexamination of Corporate Governance and Equity Prices.” Review of Financial Studies, 22 (2009), 4753–4786.Google Scholar
Kadyrzhanova, D., and Rhodes-Kropf, M.. “Concentrating on Governance.” Journal of Finance, 66 (2011), 1649–1685.Google Scholar
Karpoff, J. M., and Malatesta, P. H.. “The Wealth Effects of Second-Generation State Takeover Legislation.” Journal of Financial Economics, 25 (1989), 291–322.Google Scholar
Klock, M. S.; Mansi, S. A.; and Maxwell, W. F.. “Does Corporate Governance Matter to Bondholders?” Journal of Financial and Quantitative Analysis, 40 (2005), 693–719.CrossRefGoogle Scholar
Knoeber, C. R. “Golden Parachutes, Shark Repellents, and Hostile Tender Offers.” American Economic Review, 76 (1986), 155–167.Google Scholar
Lambert, R. A., and Larcker, D. F.. “Golden Parachutes, Executive Decision-Making, and Shareholder Wealth.” Journal of Accounting and Economics, 7 (1985), 179–203.Google Scholar
Lehn, K.; Patro, S.; and Zhao, M.. “Governance Indexes and Valuation: Which Causes Which?” Journal of Corporate Finance, 13 (2007), 907–928.Google Scholar
Linn, S. C., and McConnell, J. J.. “An Empirical Investigation of the Impact of ‘Antitakeover’ Amendments on Common Stock Prices.” Journal of Financial Economics, 11 (1983), 361–399.Google Scholar
Machlin, J. C.; Choe, H.; and Miles, J. A.. “The Effects of Golden Parachutes on Takeover Activity.” Journal of Law and Economics, 36 (1993), 861–876.Google Scholar
Malatesta, P. H., and Walkling, R. A.. “Poison Pill Securities, Stockholder Wealth, Profitability, and Ownership Structure.” Journal of Financial Economics, 20 (1988), 347–376.Google Scholar
Manne, H. G. “Mergers and the Market for Corporate Control.” Journal of Political Economy, 73 (1965), 110–120.Google Scholar
Manne, H. G. “Bring Back the Hostile Takeover.” The Wall Street Journal (June 26, 2002), A18.Google Scholar
Masulis, R. W.; Wang, C.; and Xie, F.. “Corporate Governance and Acquirer Returns.” Journal of Finance, 62 (2007), 1851–1889.Google Scholar
McWilliams, V. B. “Managerial Share Ownership and the Stock Price Effects of Antitakeover Amendment Proposals.” Journal of Finance, 45 (1990), 1627–1640.Google Scholar
Meulbroek, L. K.; Mitchell, M. L.; Mulherin, J. H.; Netter, J. M.; and Poulsen, A. B.. “Shark Repellents and Managerial Myopia: An Empirical Test.” Journal of Political Economy, 98 (1990), 1108–1117.Google Scholar
Pound, J. “The Effects of Antitakeover Amendments on Takeover Activity: Some Direct Evidence.” Journal of Law and Economics, 30 (1987), 353–367.Google Scholar
Ryngaert, M. “The Effect of Poison Pill Securities on Shareholder Wealth.” Journal of Financial Economics, 20 (1988), 377–417.Google Scholar
Sokolyk, T. “The Effects of Antitakeover Provisions on Acquisition Targets.” Journal of Corporate Finance, 17 (2011), 612–627.Google Scholar
Stein, J. C. “Takeover Threats and Managerial Myopia.” Journal of Political Economy, 96 (1988), 61–80.Google Scholar
Straska, M., and Waller, G.. “Do Antitakeover Provisions Harm Shareholders?” Journal of Corporate Finance, 16 (2010), 487–497.Google Scholar
Stulz, R. M. “Managerial Control of Voting Rights, Financing Policies and the Market for Corporate Control.” Journal of Financial Economics, 20 (1988), 25–54.Google Scholar
Sundaramurthy, C. “Antitakeover Provisions and Shareholder Value Implications: A Review and a Contingency Framework.” Journal of Management, 26 (2000), 1005–1030.Google Scholar
Wang, C., and Xie, F.. “Corporate Governance Transfer and Synergistic Gains from Mergers and Acquisitions.” Review of Financial Studies, 22 (2009), 829–858.Google Scholar
Weston, J. F.; Mitchell, M. L.; and Mulherin, J. H.. Takeovers, Restructuring, and Corporate Governance, 4th ed. Upper Saddle River, NJ: Prentice Hall (2003).Google Scholar
Supplementary material: PDF

Straska and Waller supplementary material

Appendix

Download Straska and Waller supplementary material(PDF)
PDF 312.1 KB