How Does Private Firm Innovation Affect Anti-Takeover Provisions in Corporate Charters? Evidence from Firms Going Public
70 Pages Posted: 3 Dec 2018 Last revised: 30 Dec 2019
Date Written: December 29, 2019
Using data on anti-takeover provisions (ATPs) and top management characteristics hand-collected from IPO prospectuses, we analyze the effect of the pre-IPO innovativeness and the top management quality of private firms on the number and strength of ATPs in IPO firm charters. We test the “long-term value creation” hypothesis, predicting that more innovative private firms and those with higher top management quality will have more (and stronger) ATPs in their charters; and the “management entrenchment” hypothesis, predicting the opposite. Our results support the former hypothesis. We show causality using an IV analysis using the leniency of patent examiners as an instrument.
Keywords: Anti-Takeover Provisions (ATPs), Private Firms, Pre-IPO Innovation, Top Management Quality, Initial Public Offerings (IPOs)
JEL Classification: G30, G34, K22, O31, O32
Suggested Citation: Suggested Citation