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Takeover Defenses of IPO Firms

Laura Casares Field
Pennsylvania State University - Mary Jean and Frank P. Smeal College of Business Administration

Jonathan M. Karpoff
University of Washington - Michael G. Foster School of Business

Journal of Finance, Vol. 57, No. 5, October 2002

Abstract:
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.

Keywords: Initial Public Offerings, Takeover Defenses, Acquisitions

JEL Classifications: G30, G32, G34, G24

Accepted Paper Series

Date posted: January 08, 2002 ; Last revised: August 29, 2008

Suggested Citation

Field, Laura Casares and Karpoff, Jonathan M., Takeover Defenses of IPO Firms (2002). Journal of Finance, Vol. 57, No. 5, October 2002. Available at SSRN: http://ssrn.com/abstract=286923

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Contact Information

Laura Casares Field (Contact Author) Pennsylvania State University - Mary Jean and Frank P. Smeal College of Business Administration ( email ) 609D BAB I University Park, PA 16802 United States 818-865-1483 (Phone) 818-865-3362 (Fax)
Jonathan M. Karpoff University of Washington - Michael G. Foster School of Business ( email ) Box 353200 Seattle, WA 98195-3200 United States 206-685-4954 (Phone) 206-221-6856 (Fax)