What Actually Causes Management to Resist a Takeover Bid: Managerial Entrenchment or Price Improvement?

64 Pages Posted: 23 Aug 2019

See all articles by Nicholas F. Carline

Nicholas F. Carline

Department of Finance, Birmingham Business School, University of Birmingham

Sridhar Gogineni

The University of Tampa - John H. Sykes College of Business

Pradeep K. Yadav

University of Oklahoma Price College of Business

Date Written: July 8, 2019

Abstract

Using instrumental variables, we find that having more antitakeover provisions is not only more likely to prevent a bid but also more likely to cause management resistance in the event of not doing so. The deterrent effect is likely to be decreasing in the cost to rival bidders of acquiring information about the target firm. Our findings support the notion that managerial entrenchment causes management resistance rather than that the motive is to compensate for having less pre-bid defenses and thus weaker bargaining power for price improvement. We also find that a lower premium is unlikely to cause management resistance.

Keywords: antitakeover provisions, takeover bid, management resistance, managerial entrenchment, price improvement

JEL Classification: G34, G38

Suggested Citation

Carline, Nicholas F. and Gogineni, Sridhar and Yadav, Pradeep K., What Actually Causes Management to Resist a Takeover Bid: Managerial Entrenchment or Price Improvement? (July 8, 2019). Available at SSRN: https://ssrn.com/abstract=3440672 or http://dx.doi.org/10.2139/ssrn.3440672

Nicholas F. Carline

Department of Finance, Birmingham Business School, University of Birmingham ( email )

Edgbaston Park Road
Birmingham, B15 2TY
United Kingdom

Sridhar Gogineni

The University of Tampa - John H. Sykes College of Business ( email )

401 W. Kennedy Blvd.
Tampa, FL 33606-1490
United States
8132533163 (Phone)

Pradeep K. Yadav (Contact Author)

University of Oklahoma Price College of Business ( email )

307 W.Brooks, Room 205A Division of Finance
Norman, OK 73019
United States
4053256640 (Phone)
4053255491 (Fax)

HOME PAGE: http://www.ou.edu/price/finance/faculty/pradeep_yadav.html

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