The Bonding Hypothesis of Takeover Defenses: Evidence from IPO Firms
William C. Johnson
Suffolk University - Sawyer School of Management
Jonathan M. Karpoff
University of Washington - Michael G. Foster School of Business
April 29, 2013
We propose an efficiency explanation for why firms deploy takeover defenses, which we test using IPO firm data. IPO firms deploy more defenses when they have customers, suppliers, and strategic partners that are vulnerable to changes in the firm’s operating strategy. An IPO firm’s valuation and operating performance are positively related to its use of defenses when it has such important counterparties. Share values at the IPO firm’s large customers are positively affected by the IPO firm’s use of defenses, as is the longevity of the business relationship. These results indicate that takeover defenses work to bond close business relationships.
Number of Pages in PDF File: 64
Keywords: antitakeover provisions, governance, firm value, initial public offerings
JEL Classification: G34, K22, L23working papers series
Date posted: September 7, 2011 ; Last revised: May 11, 2013
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
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