Crisis Poison Pills

Duke Law School Public Law & Legal Theory Series 2020-18

Fisher College of Business Working Paper No. 2020-03-006

Charles A. Dice Working Paper No. 2020-06

Review of Corporate Finance Studies, Forthcoming

61 Pages Posted: 23 Apr 2020 Last revised: 31 Dec 2020

See all articles by Ofer Eldar

Ofer Eldar

Duke University School of Law; Duke University - Fuqua School of Business; Duke Innovation & Entrepreneurship Initiative

Michael D. Wittry

Ohio State University (OSU) - Department of Finance

Date Written: December 30, 2020

Abstract

We show that a large number of firms adopt poison pills during periods of market turmoil. Specifically, during the coronavirus pandemic, many firms adopted poison pills following declines in valuations, and stock prices increased upon the announcement of firms’ poison pill adoption. Stock price increases are driven by (1) firms in which activist shareholders acquire ownership stakes and (2) firms in industries that had high exposure to the crisis. Likewise, we find a positive reaction to pills with provisions directed at stalling activists’ interventions. Our results suggest that crisis pills that target potentially disruptive ownership changes may benefit current shareholders.

Keywords: Poison pills, crisis pills, coronavirus, COVID-19, activist interventions

JEL Classification: G30, G32, G34, G38, E32

Suggested Citation

Eldar, Ofer and Wittry, Michael D., Crisis Poison Pills (December 30, 2020). Duke Law School Public Law & Legal Theory Series 2020-18, Fisher College of Business Working Paper No. 2020-03-006, Charles A. Dice Working Paper No. 2020-06, Review of Corporate Finance Studies, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3583428 or http://dx.doi.org/10.2139/ssrn.3583428

Ofer Eldar

Duke University School of Law ( email )

210 Science Drive
Box 90362
Durham, NC 27708
United States

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States

Duke Innovation & Entrepreneurship Initiative ( email )

215 Morris St., Suite 300
Durham, NC 27701
United States

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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