Post-Bid Takeover Resistance: Anti-Takeover Provisions, Initial Offer Quality, and Managerial Motivations
48 Pages Posted: 23 Aug 2019 Last revised: 2 Feb 2021
Date Written: January 4, 2020
If a U.S. firm is a takeover target, it is the Board of the target firm that decides whether or not to offer post-bid resistance. In this context, we empirically investigate the causal impact of the anti-takeover provisions already in place in a firm, and of initial offer quality, on the target Board’s decision to offer post-bid takeover resistance. What we find is a significant positive causal relationship from anti-takeover provisions in place to post-bid resistance; and no significant causal relationship between initial offer quality and post-bid resistance. We conclude that post-bid takeover resistance by target firm Boards is, on average, motivated by managerial entrenchment considerations, and not by good faith bargaining for price improvement.
Keywords: antitakeover provisions, takeover bid, management resistance, managerial entrenchment, price improvement
JEL Classification: G34, G38
Suggested Citation: Suggested Citation