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, 10(1), 204-251, March 2021.
61 Pages Posted: 23 Apr 2020 Last revised: 12 Apr 2021
Date Written: December 30, 2020
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: Suggested Citation