Corporate Governance and the Nature of Takeover Resistance
Nicholas F. Carline
University of Birmingham - Birmingham Business School
Scott C. Linn
University of Oklahoma - Michael F. Price College of Business
Pradeep K. Yadav
University of Oklahoma Price College of Business
March 23, 2014
American Finance Association Meetings Working Paper
We investigate the relation between corporate governance characteristics of hostile takeover targets and the choice to employ ‘harmful’ resistance that is not perceived as being motivated by shareholders’ interests. We find that harmful resistance is associated with firms where managers have more pronounced ownership-based and age-related incentives for control, and directors have equity interests less aligned to stockholders. These firms also have less independent boards, are exposed to weaker discipline from outside blockholders, and are inferior performers. In the presence of harmful resistance, the market is less optimistic about the chances of bid completion, and there is a greater likelihood of managerial turnover.
Number of Pages in PDF File: 47
Keywords: Takeover bid; Resistance; Corporate Governance; C.E.O. turnover
JEL Classification: G34
Date posted: March 16, 2011 ; Last revised: March 24, 2014
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