Takeover Defenses of IPO Firms
Laura Casares Field
Pennsylvania State University - Smeal College of Business
Jonathan M. Karpoff
University of Washington - Michael G. Foster School of Business
Journal of Finance, Vol. 57, No. 5, October 2002
Many firms deploy takeover defenses when they go public. We find that IPO managers are more likely to deploy defenses when their compensation is high, shareholdings are small, and oversight from non-managerial shareholders is weak. The presence of a takeover defense at the time of the IPO is negatively related to subsequent acquisition likelihood, yet has no impact on takeover premiums for firms that are acquired. These results do not support arguments that takeover defenses facilitate the eventual sale of the IPO firm at high takeover premiums. Rather, they suggest that managers shift the cost of takeover protection onto non-managerial shareholders. Thus, agency problems are important even for firms at the IPO stage.
Number of Pages in PDF File: 34
Keywords: Initial Public Offerings, Takeover Defenses, Acquisitions
JEL Classification: G30, G32, G34, G24
Date posted: January 8, 2002 ; Last revised: August 29, 2008
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