Researchers disagree sharply over which antitakeover provisions affect a firm’s takeover likelihood. Some argue, for example, that poison pills are the only important takeover deterrents, while others claim that classified boards or coverage by business combination laws are. Other researchers argue that golden parachutes deter takeovers, while some contend that they facilitate takeovers. Similarly, there is significant disagreement about whether such provisions as supermajority vote requirements and blank check preferred stock offer any incremental takeover deterrence, or whether the widespread availability of shadow poison pills (pills that can be quickly adopted without shareholder approval) renders most other provisions irrelevant. In short, there is little consensus among researchers about which, or whether, antitakeover provisions affect a firm’s takeover likelihood in meaningful ways.
Posted by Jonathan M. Karpoff (University of Washington), Robert J. Schonlau (Brigham Young University), and Eric W. Wehrly (Western Washington University), on Saturday, April 28, 2018
Editor's Note: Jonathan M. Karpoff is Washington Mutual Endowed Chair in Innovation and Professor of Finance at the University of Washington Foster School of Business; Robert J. Schonlau is Assistant Professor of Finance at Brigham Young University Marriott School of Business; and Eric W. Wehrly is Assistant Professor of Finance at Western Washington University. This post is based on their recent paper.
Related research from the Program on Corporate Governance includes What Matters in Corporate Governance? by Lucian Bebchuk, Alma Cohen, and Allen Ferrell.
