The Consequences to Directors for Deploying Poison Pills

Fisher College of Business Working Paper No. 2019-03-023

Charles A. Dice Center Working Paper No. 2019-23

55 Pages Posted: 27 Sep 2019 Last revised: 26 Jul 2021

See all articles by William C. Johnson

William C. Johnson

University of Massachusetts Lowell - The Robert J. Manning School of Business

Jonathan M. Karpoff

University of Washington - Michael G. Foster School of Business; European Corporate Governance Institute (ECGI)

Michael D. Wittry

Ohio State University (OSU) - Department of Finance

Date Written: July 16, 2021

Abstract

We examine the labor market consequences for directors who adopt poison pills. These directors experience a decrease in shareholder votes, an increase in termination rates across all their directorships, and a decrease in the likelihood of new board appointments. These adverse consequences accrue especially when pill adoption is costly for the firm and are not attributable to firm-specific events that can motivate pill adoptions. Firms have positive stock price reactions when pill-associated directors die or depart from their boards, compared to zero returns for other directors. We conclude that pill-adopting directors experience a decrease in the value of their services.

Keywords: poison pills, director reputation, director turnover, director labor market

JEL Classification: G34, K22, L51

Suggested Citation

Johnson, William C. and Karpoff, Jonathan M. and Wittry, Michael D., The Consequences to Directors for Deploying Poison Pills (July 16, 2021). Fisher College of Business Working Paper No. 2019-03-023, Charles A. Dice Center Working Paper No. 2019-23, Available at SSRN: https://ssrn.com/abstract=3460201 or http://dx.doi.org/10.2139/ssrn.3460201

William C. Johnson

University of Massachusetts Lowell - The Robert J. Manning School of Business ( email )

One University Avenue
Lowell, MA 01854
United States

Jonathan M. Karpoff

University of Washington - Michael G. Foster School of Business ( email )

Box 353226
Seattle, WA 98195-3200
United States
206-685-4954 (Phone)
206-221-6856 (Fax)

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Michael D. Wittry (Contact Author)

Ohio State University (OSU) - Department of Finance ( email )

854 Fisher Hall
2100 Neil Avenue
Columbus, OH 43210-1144
United States
614-292-3217 (Phone)

HOME PAGE: http://fisher.osu.edu/people/wittry.2

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