How Does Private Firm Innovation Affect Anti-Takeover Provisions in Corporate Charters? Evidence from Initial Public Offerings

Using data on anti-takeover provisions (ATPs) and top management characteristics hand-collected from IPO prospectuses, we analyze the effect of the pre-IPO innovativeness and the top management quality of private firms on the number and strength of ATPs in IPO firm charters. We test the “long-term value creation” hypothesis, predicting that more innovative private firms and those with higher top management quality will have more (and stronger) ATPs in their charters; and the “management entrenchment” hypothesis, predicting the opposite. Our results support the former hypothesis. We show causality using an IV analysis using the leniency of patent examiners as an instrument.

Keywords: Anti-Takeover Provisions (ATPs); Private Firms; Pre-IPO Innovation; Top Management Quality; Initial Public Offerings (IPOs)

JEL Classification: G30, G34, K22, O31, O32

Suggested Citation: Suggested Citation

Chemmanur, Thomas J. and Gupta, Manish and Simonyan, Karen and Zheng, Xiang, How Does Private Firm Innovation Affect Anti-Takeover Provisions in Corporate Charters? Evidence from Initial Public Offerings (August 20, 2022). Available at SSRN: https://ssrn.com/abstract=3287883 or http://dx.doi.org/10.2139/ssrn.3287883

Thomas J. Chemmanur

Boston College - Carroll School of Management ( email )

Finance Department, 436 Fulton Hall
Carroll School of Management, Boston College
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