Post-Bid Takeover Resistance: Antitakeover Provisions, Initial Offer Quality, and Target Board Motivation
51 Pages Posted: 23 Aug 2019 Last revised: 26 Oct 2021
Date Written: October 24, 2021
Unlike Britain and many E.U. countries, it is the board of a U.S. takeover target firm that decides on post-bid resistance. In this context, we investigate the causal impact of existing antitakeover provisions (ATPs) and initial offer quality on the target-board’s decision to resist post-bid. Exploiting instrumental variables, we find a positive relationship from existing ATPs to post-bid resistance, and no causal relationship from initial offer quality to post-bid resistance. We argue that this necessarily implies that the target-board’s decision to resist is, on average, not motivated by good-faith bargaining in stockholder interest. Instead, it is indicative of entrenchment considerations.
Keywords: takeover resistance; antitakeover provisions; initial offer quality; good-faith bargaining; entrenchment
JEL Classification: G34; G38
Suggested Citation: Suggested Citation