Price and Probability: Decomposing the Takeover Effects of Anti-Takeover Provisions

62 Pages Posted: 12 Jan 2016 Last revised: 11 Aug 2016

See all articles by Vicente Cuñat

Vicente Cuñat

London School of Economics & Political Science (LSE) - Financial Markets Group

Mireia Gine

IESE Business School, University of Navarra ; The University of Pennsylvania

Maria Guadalupe

INSEAD - Economics and Political Sciences; Centre for Economic Policy Research (CEPR); Institute for the Study of Labor (IZA)

Multiple version iconThere are 2 versions of this paper

Date Written: August 2016

Abstract

This paper studies the effects of anti-takeover provisions on takeovers and identifies the channels through which they create or destroy value for firms, as well as for the economy as a whole. We provide causal estimates – that also deal with the endogenous selection of targets – showing that voting to remove an anti-takeover provision increases the takeover probability by 4.5% and garners a 2.8% higher premium, which results from increased competition for less protected targets. We also find evidence of net value creation in the economy stemming from more related acquisitions and targets being matched to more valuable acquirers.

Keywords: takeover premium, anti-takeover provisions, shareholder proposals

JEL Classification: G34

Suggested Citation

Cuñat, Vicente and Gine, Mireia and Guadalupe, Maria, Price and Probability: Decomposing the Takeover Effects of Anti-Takeover Provisions (August 2016). European Corporate Governance Institute (ECGI) - Finance Working Paper No. 474/2016. Available at SSRN: https://ssrn.com/abstract=2713906 or http://dx.doi.org/10.2139/ssrn.2713906

Vicente Cuñat (Contact Author)

London School of Economics & Political Science (LSE) - Financial Markets Group ( email )

Houghton Street
London WC2A 2AE
United Kingdom

HOME PAGE: http://www.vicentecunat.com

Mireia Gine

IESE Business School, University of Navarra ( email )

Avenida Pearson 21
Barcelona, 08034
Spain

The University of Pennsylvania ( email )

Philadelphia, PA 19104
United States

Maria Guadalupe

INSEAD - Economics and Political Sciences ( email )

Boulevard de Constance
F-77305 Fontainebleau Cedex
France

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

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