Takeover Defenses: Entrenchment and Efficiency
48 Pages Posted: 2 Aug 2014
Date Written: July 31, 2014
This paper explores the potential role of anti-takeover provisions (ATPs) in long-term value creation. Using multiple research designs, we find that long-term focused (innovative) firms benefit from takeover protection. We also find that the protected innovative firms are less likely to engage in myopic activities, which is consistent with protection reducing short-term pressures on innovative firms. In contrast to prior research that predominantly documents evidence of harmful effects of ATPs on average, we show that ATPs can provide benefits to a subset of firms.
Keywords: Corporate governance, Takeover defenses, Antitakeover provision, State antitakeover legislation, Firm value, Managerial Myopia
JEL Classification: G32, G34, G38
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