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The relative number of anti‐takeover provisions and the market for corporate control
Author(s) -
Obaydin Ivan,
Zurbruegg Ralf,
Brockman Paul,
Richardson Grant
Publication year - 2021
Publication title -
journal of financial research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.319
H-Index - 49
eISSN - 1475-6803
pISSN - 0270-2592
DOI - 10.1111/jfir.12241
Subject(s) - shareholder , market for corporate control , business , welfare , control (management) , matching (statistics) , monetary economics , outcome (game theory) , distribution (mathematics) , corporate governance , microeconomics , economics , finance , market economy , mathematical analysis , statistics , mathematics , management
Using propensity score matching, we provide new evidence of a nonmonotonic relation between the number of anti‐takeover provisions (ATPs) a firm adopts, relative to peer‐matched firms, and takeover likelihood. Firms with either a relatively low or high number of ATPs are significantly less likely to be a takeover target. We argue that this outcome is a result of the expected benefits versus costs of targeting firms in the left and right tails of the peer‐matched ATP distribution. In particular, firms in the left tail with a relatively small number of ATPs tend to have high market valuations, indicative of management optimizing shareholder welfare and hence being less concerned about the threat of a takeover. Overall, our findings have important implications for both corporate and regulatory policy.