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Do antitakeover provisions harm shareholders?

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  • Stráska, Miroslava
  • Waller, Gregory
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    Abstract

    We reexamine the negative relation between firm value and the number of antitakeover provisions a firm has in place. We document that firms with characteristics indicating low power to bargain for favorable terms in a takeover, but also indicating high potential agency costs, have more antitakeover provisions in place. We also find that for these firms, Tobin's Q increases in the number of adopted provisions. These findings are robust to several methods that control for endogeneity. Our evidence suggests that adopting more antitakeover provisions is beneficial for certain firms and challenges the commonplace view that antitakeover provisions are universally harmful for shareholders.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Corporate Finance.

    Volume (Year): 16 (2010)
    Issue (Month): 4 (September)
    Pages: 487-497

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    Handle: RePEc:eee:corfin:v:16:y:2010:i:4:p:487-497

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    Web page: http://www.elsevier.com/locate/jcorpfin

    Related research

    Keywords: Corporate governance Governance index Antitakeover provisions Tobin's Q;

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    Cited by:
    1. Sokolyk, Tatyana, 2011. "The effects of antitakeover provisions on acquisition targets," Journal of Corporate Finance, Elsevier, vol. 17(3), pages 612-627, June.
    2. Becker-Blease, John R., 2011. "Governance and innovation," Journal of Corporate Finance, Elsevier, vol. 17(4), pages 947-958, September.
    3. Roberto E. Wessels & Tom J. Wansbeek, 2014. "What is the Relation (if any) Between a Firm's Corporate Governance Arrangements and its Financial Performance?," CESifo Working Paper Series 4599, CESifo Group Munich.
    4. Wang, Weishen & Graefe-Anderson, Rachel & Pyles, Mark K. & Kim, Dongnyoung, 2014. "How entrenched managers beat earnings expectations before and after SOX," The Quarterly Review of Economics and Finance, Elsevier, vol. 54(1), pages 82-91.

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