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Takeover Protection and Firm Value

Author

Listed:
  • Andres Christian

    (WHU – Otto Beisheim School of Management, Vallendar, Germany)

  • Jacob Martin

    (WHU – Otto Beisheim School of Management, Vallendar, Germany)

  • Ulrich Lennart

    (WHU – Otto Beisheim School of Management, Vallendar, Germany)

Abstract

We examine firm value consequences of anti-takeover regulation, exploiting the staggered announcement and implementation of an anti-takeover regulation in the U.K. We show that, on average, takeover protection increases firm value. This effect is partly driven by innovative firms expanding their R&D activities. However, the anti-takeover regulation also increases the value of less productive firms. Anti-takeover regulation could thus constrain highly productive firms from taking over low-productivity firms. Our results imply that, while takeover protection may stimulate innovation, it can distort the allocation of funds by preventing market share from moving from less efficient to more efficient firms.

Suggested Citation

  • Andres Christian & Jacob Martin & Ulrich Lennart, 2019. "Takeover Protection and Firm Value," Review of Law & Economics, De Gruyter, vol. 15(1), pages 1-46, March.
    • Handle: RePEc:bpj:rlecon:v:15:y:2019:i:1:p:46:n:8
    DOI: 10.1515/rle-2018-0048
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    More about this item

    Keywords

    firm value; anti-takeover regulation; productivity; misallocation;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law

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