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

51 Pages Posted: 27 Sep 2019 Last revised: 19 Feb 2021

See all articles by William C. Johnson

William C. Johnson

Suffolk University - Sawyer School of Management; Vienna University of Economics and 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: February 15, 2021

Abstract

We examine the labor market consequences for directors who adopt poison pills. Directors who become associated with pill adoption experience a decrease in vote margins, an increase in termination rates across all their directorships, and a decrease in the likelihood of new board appointments. These adverse consequences accrue primarily when pill adoption is costly for the firm. Firms have positive stock price reactions when pill-associated directors die or depart from their boards, compared to zero abnormal returns for other directors. We conclude that directors who become associated with poison pills suffer 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 (February 15, 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

Suffolk University - Sawyer School of Management ( email )

Boston, MA 02108
United States

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

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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