Do IPO Charters Maximize Firm Value? Antitakeover Protection in Ipos

49 Pages Posted: 24 Feb 2000  

Robert Daines

Stanford Law School; Stanford Graduate School of Business

Michael Klausner

Stanford Law School

Multiple version iconThere are 2 versions of this paper

Date Written: January 16, 2000

Abstract

This paper focuses on the widely held views that: (a) antitakeover provisions (ATPs) increase agency costs, thereby reducing firm value; and (b) firms going public minimize agency costs, thereby maximizing firm value. We show that these views cannot comfortably co-exist: ATPs are common in a sample of IPO-stage charters. Moreover, ATP use is not explained by two efficiency explanations of ATP use with theoretical support - target firms' need for bargaining power when a bid is made and the threat of managerial myopia. Rather, we find that antitakeover protection is used to protect management when takeovers are most likely and management performance most transparent. ATP use, however, is uncorrelated with a proxy for high private benefits.

JEL Classification: G30, G32

Suggested Citation

Daines, Robert and Klausner, Michael, Do IPO Charters Maximize Firm Value? Antitakeover Protection in Ipos (January 16, 2000). Journal of Law, Economics and Organization, Vol. 17, pp. 83-120, 2001. Available at SSRN: https://ssrn.com/abstract=187348 or http://dx.doi.org/10.2139/ssrn.187348

Robert Daines

Stanford Law School ( email )

559 Nathan Abbott Way
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Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
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Michael D. Klausner (Contact Author)

Stanford Law School ( email )

559 Nathan Abbott Way
Stanford, CA 94305-8610
United States
650-723-6433 (Phone)
650-725-0253 (Fax)

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