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The relative number of anti‐takeover provisions and the market for corporate control

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  • Ivan Obaydin
  • Ralf Zurbruegg
  • Paul Brockman
  • Grant Richardson

Abstract

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.

Suggested Citation

  • Ivan Obaydin & Ralf Zurbruegg & Paul Brockman & Grant Richardson, 2021. "The relative number of anti‐takeover provisions and the market for corporate control," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 44(2), pages 279-298, June.
  • Handle: RePEc:bla:jfnres:v:44:y:2021:i:2:p:279-298
    DOI: 10.1111/jfir.12241
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    References listed on IDEAS

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    5. Harford, Jarrad & Humphery-Jenner, Mark & Powell, Ronan, 2012. "The sources of value destruction in acquisitions by entrenched managers," Journal of Financial Economics, Elsevier, vol. 106(2), pages 247-261.
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