The Effect of Poison Pill Adoptions and Court Rulings on Firm Entrenchment
31 Pages Posted: 27 Sep 2015 Last revised: 16 Jul 2016
Date Written: September 25, 2015
Abstract
We challenge a common presumption that poison pills and two Delaware case rulings in 1995 validating such pills materially entrench firms. Based on unsolicited takeover attempts from 1985 to 2009, we find that poison pills enhance takeover premiums, but do not reduce completion rates. Furthermore, the 1995 Delaware rulings affected neither the use of poison pills among the targets, the effectiveness of the pills that were used, the completion rate of the takeover attempts, nor the takeover premiums.
Keywords: Poison Pill, Entrenchment, Takeover Defenses, Delaware
JEL Classification: G30, G34, G38
Suggested Citation: Suggested Citation