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The adoption of poison pills and managerial entrenchment: Evidence from Japan

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  • Arikawa, Yasuhiro
  • Mitsusada, Yosuke

Abstract

Using Japanese cases, this paper presents evidence that the adoption of poison pills reveals private information about preferences for managerial entrenchment to the stock market. We find that this private information revelation effect is the reason for the stock price decline with the announcement of poison pill defenses. The stock market considers the adoption of a poison pill to be a signal that the manager wishes to entrench him/herself. We also find that a CEO with longer tenure is more likely to adopt a poison pill when the performance of the firm is poor.

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  • Arikawa, Yasuhiro & Mitsusada, Yosuke, 2011. "The adoption of poison pills and managerial entrenchment: Evidence from Japan," Japan and the World Economy, Elsevier, vol. 23(1), pages 63-77, January.
    • Handle: RePEc:eee:japwor:v:23:y:2011:i:1:p:63-77
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    Cited by:

    1. Fukuda, Shin-ichi & Kasuya, Munehisa & Nakajima, Jouchi, 2018. "The role of corporate governance in Japanese unlisted companies," Japan and the World Economy, Elsevier, vol. 47(C), pages 27-39.
    2. Randall Morck & Bernard Yeung, 2017. "East Asian Financial and Economic Development," Working Papers id:12112, eSocialSciences.
    3. Hamao, Yasushi & Matos, Pedro, 2018. "U.S.-style investor activism in Japan: The first ten years?," Journal of the Japanese and International Economies, Elsevier, vol. 48(C), pages 29-54.

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    Keywords

    Poison pill Takeover defense;

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