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Do Anti-Takeover Provisions Spur Corporate Innovation? A Regression Discontinuity Analysis

66 Pages Posted: 17 Mar 2010 Last revised: 12 Feb 2017

Thomas J. Chemmanur

Boston College - Carroll School of Management

Xuan Tian

Tsinghua University - PBC School of Finance

Date Written: February 10, 2017

Abstract

We study the effect of antitakeover provisions (ATPs) on innovation. To establish causality, we use a regression discontinuity approach that relies on locally exogenous variation generated by shareholder proposal votes. We find a positive, causal effect of ATPs on innovation. This positive effect is more pronounced in firms that are subject to a larger degree of information asymmetry and operate in more competitive product markets. The evidence suggests that ATPs help nurture innovation by insulating managers from short-term pressures arising from equity markets. Finally, the number of ATPs contributes positively to firm value for firms involved in intensive innovation activities.

Keywords: anti-takeover provisions, innovation, firm value

JEL Classification: G34, G38, O31

Suggested Citation

Chemmanur, Thomas J. and Tian, Xuan, Do Anti-Takeover Provisions Spur Corporate Innovation? A Regression Discontinuity Analysis (February 10, 2017). Journal of Financial and Quantitative Analysis, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1572219 or http://dx.doi.org/10.2139/ssrn.1572219

Thomas J. Chemmanur

Boston College - Carroll School of Management ( email )

Finance Department, 436 Fulton Hall
Carroll School of Management, Boston College
Chestnut Hill, MA 02467-3808
United States
617-552-3980 (Phone)
617-552-0431 (Fax)

HOME PAGE: http://https://www2.bc.edu/thomas-chemmanur/

Xuan Tian (Contact Author)

Tsinghua University - PBC School of Finance ( email )

No. 43, Chengfu Road
Haidian District
Beijing 100083
China
+86-10-62794103 (Phone)

HOME PAGE: http://xuantian.info/

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