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Bargaining power of targets: Takeover defenses and top-tier target advisors

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  • Ertugrul, Mine

Abstract

This paper examines whether takeover defenses (i.e., poison pills and classified boards) can enhance the bargaining position of the target firm, especially when the target advisor is a top-tier investment bank. I find that classified boards and poison pills are positively linked to target's share of merger gains, target announcement returns, and premiums when the target employs a top-tier advisor and the acquisition is initiated by the acquirer. These results support the argument that top-tier target advisors might be more effective in utilizing takeover defenses in deal negotiations to enhance the bargaining position of their client firms and help them capture higher returns and share of merger gains.

Suggested Citation

  • Ertugrul, Mine, 2015. "Bargaining power of targets: Takeover defenses and top-tier target advisors," Journal of Economics and Business, Elsevier, vol. 78(C), pages 48-78.
    • Handle: RePEc:eee:jebusi:v:78:y:2015:i:c:p:48-78
    DOI: 10.1016/j.jeconbus.2014.12.001
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    Cited by:

    1. Stephen N. Jurich & M. Mark Walker, 2021. "Deal motivations and bargaining power: do executives show their hand in SEC filings?," SN Business & Economics, Springer, vol. 1(4), pages 1-28, April.
    2. Anna Bedford & Martin Bugeja & Matthew Grosse, 2021. "The choice of financial advisory and independent expert services in takeovers: evidence in a setting where the services are independent," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(2), pages 3649-3683, June.
    3. Michael Klitzka & Jianan He & Dirk Schiereck, 2022. "The rationality of M&A targets in the choice of payment methods," Review of Managerial Science, Springer, vol. 16(4), pages 933-967, May.

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    More about this item

    Keywords

    Acquisitions; Takeover defenses; Top-tier advisors; Bargaining;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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