Passive Shareholders as a Takeover Defense
47 Pages Posted: 2 Feb 2011 Last revised: 16 Mar 2011
Date Written: February 23, 2011
This paper evaluates the effect of shareholder passiveness on the market for corporate control. We find that firms with more passive shareholders (lower ownership per non-institutional shareholder) are less likely to be takeover targets, less likely to be acquired and command higher premiums. Using the adoption of anti-takeover law in Delaware as an exogenous shock to anti-takeover protection, we show that the passiveness of shareholder base decreases as the takeover threat subsides. Our findings support the idea that a passive shareholder base is a substitute for other takeover defenses.
Keywords: Mergers and Acquisitions, Ownership Structure and Corporate Governance
JEL Classification: G34, G32
Suggested Citation: Suggested Citation