Do takeover laws matter? Evidence from five decades of hostile takeovers

Do takeover laws matter? Evidence from five decades of hostile takeovers

This study evaluates the relation between hostile takeovers and 17 takeover laws from 1965 to 2014. Using a data set of largely exogenous legal changes, we find that certain takeover laws, such as poison pill and business combination laws, have no discernible impact on hostile activity, while others...

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Veröffentlicht in:Journal of financial economics 2017-06, Vol.124 (3), p.464-485
Hauptverfasser: Cain, Matthew D., McKeon, Stephen B., Solomon, Steven Davidoff
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Sprache:eng
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Anti takeover strategy
Corporate governance
Hostile takeovers
Law
Legislation
Mergers and acquisitions
Power
Premiums
Takeovers
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creator Cain, Matthew D.
McKeon, Stephen B.
Solomon, Steven Davidoff
description This study evaluates the relation between hostile takeovers and 17 takeover laws from 1965 to 2014. Using a data set of largely exogenous legal changes, we find that certain takeover laws, such as poison pill and business combination laws, have no discernible impact on hostile activity, while others such as fair price laws have reduced hostile takeovers. We construct a Takeover Index from the laws and find that higher takeover protection is associated with lower firm value, consistent with entrenchment and agency costs. However, conditional on a bid, firms with more protection achieve higher premiums, consistent with increased bargaining power.
doi_str_mv 10.1016/j.jfineco.2017.04.003
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subjects Anti takeover strategy
Corporate governance
Hostile takeovers
Law
Legislation
Mergers and acquisitions
Power
Premiums
Takeovers
title Do takeover laws matter? Evidence from five decades of hostile takeovers
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