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

See all articles by Ofer Eldar

Ofer Eldar

University of California, Berkeley - School of Law; European Corporate Governance Institute (ECGI)

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, 10(1), 204-251, March 2021., Available at SSRN: https://ssrn.com/abstract=3583428 or http://dx.doi.org/10.2139/ssrn.3583428

Ofer Eldar

University of California, Berkeley - School of Law ( email )

215 Law Building
Berkeley, CA 94720-7200
United States

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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