Do Anti-Takeover Provisions Spur Corporate Innovation?

Abstract:     
We study the relation between antitakeover provisions (ATPs) and corporate innovation, and show that ATPs affect firm value through a novel “innovation channel.” We find that firms with a larger number of ATPs are more innovative. To establish causality, we use a regression discontinuity approach relying on “locally” exogenous variation in the number of ATPs generated by governance proposal votes that pass or fail by a small voter margin, as well as an instrumental variable approach. The evidence suggests that ATPs spur innovation and thus allow long-run value creation by insulating managers from short-term pressures arising from the equity market.

Number of Pages in PDF File: 47

Keywords: anti-takeover provisions, innovation, firm value

JEL Classification: G34, G38, O31

working papers series