The Impact of Third Generation Antitakeover Laws on Shareholder Wealth
Posted: 15 Sep 1999
Date Written: September 1994
We examine the impact of nine third generation state antitakeover laws on stock returns. At conventional levels of significance, six of the nine types of laws appear to have statistically significant negative CARs' surrounding the passage date, for firms without prior antitakeover charter amendments. However, these results are not supported using a Bonferroni analysis. Contrary to Karpoff and Malatesta (1989) we, also, test for support for the shareholder interest hypothesis by comparing firms with and without golden parachutes. At conventional significance levels, four of the nine laws had significant differences in returns between firms with and firms without golden parachutes. Again, the Bonferroni analysis rejects any significant differences in returns. Previous papers studying antitakeover legislation did not examine many laws or they did not control for the number of event windows. CARs may appear significant at conventional levels; however, after controlling for the number of events using a Bonferroni statistic it is found that these CARs are not significant. This study concludes that these nine types of antitakeover legislation have no impact on stock returns.
JEL Classification: G1
Suggested Citation: Suggested Citation