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The impact of preventive takeover defences on corporate financial performance: Evidence from the US

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  • Gigante, Gimede
  • Angioni, Ottavio

Abstract

This study investigates the impact on financial performances of preventive takeover defences in S&P500 firms from 2017 to 2021. This study aims to study takeover defences impact on non-market performance indicators. Previous research is not extensive, and it provides contradictory evidence focusing more on market-related measures. Four shark repellents' impact on ROE, ROA, CAPEX and EBIT were studied. Panel data pooled OLS models results highlight that takeover defences impact is heterogeneous. Firstly, there is a negative correlation between takeover defences and profitability indicators, supporting the managerial entrenchment hypothesis. In particular, few defences directly cause a reduction in ROE. Other negative relations damage shareholders. Secondly, directors' removal limitations are positively correlated with long-term investments: in line with the shareholders' interest hypothesis. Finally, the combination of different takeover defences has a moderating effect on the initial impact. This study contributes to the debate on the harmfulness of takeover defences and provides insights to firms and regulators on the best defence to adopt.

Suggested Citation

  • Gigante, Gimede & Angioni, Ottavio, 2023. "The impact of preventive takeover defences on corporate financial performance: Evidence from the US," Finance Research Letters, Elsevier, vol. 55(PA).
    • Handle: RePEc:eee:finlet:v:55:y:2023:i:pa:s154461232300209x
    DOI: 10.1016/j.frl.2023.103836
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    References listed on IDEAS

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    More about this item

    Keywords

    Antitakeover provision; Takeover defence; Corporate governance; Market for corporate control; Mergers and acquisitions;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • 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
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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