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The Probability to Abolish Governance Provisions

Author

Listed:
  • Seoungpil Ahn
  • Gwangheon Hong

Abstract

The negative relation between governance indices and acquisition performance weakens in the post Sarbanes-Oxley Act (SOX) period. We examine whether firms remove anti-takeover provisions to eliminate the adverse impact of anti-takeover provisions. We find that strong external monitoring mechanisms such as the presence of public pension funds and large institutional investors leads firms to abolish some anti-takeover provisions and classified boards in particular. This partial elimination of anti-takeover provisions suggests a trade-off between benefit and cost of anti-takeover provisions.

Suggested Citation

  • Seoungpil Ahn & Gwangheon Hong, 2016. "The Probability to Abolish Governance Provisions," Business and Economic Research, Macrothink Institute, vol. 6(2), pages 379-389, December.
    • Handle: RePEc:mth:ber888:v:6:y:2016:i:2:p:379-389
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    References listed on IDEAS

    as
    1. John E. Core & Wayne R. Guay & Tjomme O. Rusticus, 2006. "Does Weak Governance Cause Weak Stock Returns? An Examination of Firm Operating Performance and Investors' Expectations," Journal of Finance, American Finance Association, vol. 61(2), pages 655-687, April.
    2. K. J. Martijn Cremers & Vinay B. Nair, 2005. "Governance Mechanisms and Equity Prices," Journal of Finance, American Finance Association, vol. 60(6), pages 2859-2894, December.
    3. Lucian Bebchuk & Alma Cohen & Allen Ferrell, 2009. "What Matters in Corporate Governance?," The Review of Financial Studies, Society for Financial Studies, vol. 22(2), pages 783-827, February.
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    More about this item

    Keywords

    Anti-takeover provisions; Governance mechanism; Institutional investors; Industry competition;
    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

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