Which Antitakeover Provisions Deter Takeovers?

Abstract

Antitakeover provisions play a central role in corporate governance research. But there is little agreement over which, if any, provisions actually affect takeover likelihoods. In tests that account for the endogenous use of antitakeover provisions, we find that at most 11 of the 24 G-index provisions are negatively related to takeover likelihood. Various indices used in the literature measure takeover deterrence to the extent they include this subset of provisions. In more stringent tests, only four provisions are consistently and negatively related to takeover likelihood throughout the 1995-2020 period, while one provision (golden parachutes) is positively related to takeover likelihood.

Keywords: Antitakeover provisions, takeover defenses, takeover likelihood, governance, acquisitions

JEL Classification: G34, K22, L14