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Price and Probability: Decomposing the Takeover Effects of Anti-Takeover Provisions

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  • Guadalupe, Maria
  • Cuñat, Vicente
  • Gine, Mireia

Abstract

We study the causal effects of anti-takeover provisions on takeovers. We decompose their effect on prices, takeover likelihood and target selection and explore the channels through which they change shareholders’ value. We provide causal estimates based on shareholder proposals and deal with the endogenous selection of targets through bounding techniques. Voting to remove an anti-takeover provision increases the annual takeover probability by 0.9% and increases premiums by 2.8%. The premium effect is driven by more related acquisitions, better matching and higher synergies when targets are less protected. We do not find evidence of a trade-off between premiums and takeover probabilities.

Suggested Citation

  • Guadalupe, Maria & Cuñat, Vicente & Gine, Mireia, 2017. "Price and Probability: Decomposing the Takeover Effects of Anti-Takeover Provisions," CEPR Discussion Papers 12059, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:12059
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    Cited by:

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    3. Liu, Tingting & Liu, Yu & Ullah, Barkat & Wei, Zuobao & Xu, Lixin Colin, 2021. "The dark side of transparency in developing countries: The link between financial reporting practices and corruption," Journal of Corporate Finance, Elsevier, vol. 66(C).
    4. Karpoff, Jonathan M. & Schonlau, Robert & Wehrly, Eric, 2022. "Which antitakeover provisions deter takeovers?," Journal of Corporate Finance, Elsevier, vol. 75(C).
    5. Liu, Yukun & Wu, Xi, 2023. "How does shareholder governance affect the cost of borrowing? Evidence from the passage of anti-takeover provisions," Journal of Accounting and Economics, Elsevier, vol. 75(2).
    6. Al Dah, Bilal, 2018. "Monitoring or empowering CEOs? The moderating effect of shareholder rights," Research in International Business and Finance, Elsevier, vol. 46(C), pages 502-515.
    7. Gogineni, Sridhar & Upadhyay, Arun, 2020. "Target governance provisions and acquisition types," Journal of Business Research, Elsevier, vol. 110(C), pages 160-172.

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    JEL classification:

    • F3 - International Economics - - International Finance
    • G3 - Financial Economics - - Corporate Finance and Governance
    • J1 - Labor and Demographic Economics - - Demographic Economics

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