Crisis Poison Pills*

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. (JEL G30, G32, G34, G38, E32) Received August 14, 2020; editorial decision October 23, 2020 by Editor Andrew Ellul. Authors have furnished an Internet Appendix,which is available on the Oxford University Press Web site next to the link to the final published paper online.