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Determinants of corporate anti-takeover provisions

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  • JUAN SANTALO

    ()
    (Instituto de Empresa)

Abstract

In this paper I study empirically the industry and firm characteristics that determine the level of corporate antitakeover protection. I find that the level of antitakeover protection is negatively associated with the level of firm-specific organizational capital and with stock market volatility. On the other hand, firms that allow a larger degree of antitakeover protection to their managers do indeed invest more in long term projects and operate in more concentrated industries. All these findings are consistent with a managerial entrenchment interpretation of corporate antitakeover provisions.

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File URL: http://latienda.ie.edu/working_papers_economia/WP04-28.pdf
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Bibliographic Info

Paper provided by Instituto de Empresa, Area of Economic Environment in its series Working Papers Economia with number wp04-28.

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Length: 28 pages
Date of creation: Oct 2004
Date of revision:
Handle: RePEc:emp:wpaper:wp04-28

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Related research

Keywords: Takeover defenses; Organizational capital; Product market competition; Managerial compensation;

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  1. Sendhil Mullainathan & Marianne Bertrand, 1998. "Executive Compensation and Incentives: The Impact of Takeover Legislation," Working papers 98-20, Massachusetts Institute of Technology (MIT), Department of Economics.
  2. Demsetz, Harold & Lehn, Kenneth, 1985. "The Structure of Corporate Ownership: Causes and Consequences," Journal of Political Economy, University of Chicago Press, vol. 93(6), pages 1155-77, December.
  3. Stulz, ReneM., 1988. "Managerial control of voting rights : Financing policies and the market for corporate control," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 25-54, January.
  4. Lucian Arye Bebchuk & John C. Coates IV & Guhan Subramanian, 2002. "The Powerful Antitakeover Force of Staggered Boards: Theory, Evidence and Policy," NBER Working Papers 8974, National Bureau of Economic Research, Inc.
  5. Philippe Aghion & Jean Tirole, 1994. "Normal and Real Authority in Organizations," Working papers 94-13, Massachusetts Institute of Technology (MIT), Department of Economics.
  6. Paul A. Gompers & Joy L. Ishii & Andrew Metrick, 2002. "Corporate Governance and Equity Prices," Center for Financial Institutions Working Papers 02-32, Wharton School Center for Financial Institutions, University of Pennsylvania.
  7. Canice Prendergast, 2002. "The Tenuous Trade-off between Risk and Incentives," Journal of Political Economy, University of Chicago Press, vol. 110(5), pages 1071-1102, October.
  8. Michael Raith, 2003. "Competition, Risk, and Managerial Incentives," American Economic Review, American Economic Association, vol. 93(4), pages 1425-1436, September.
  9. Stein, Jeremy C., 1988. "Takeover Threats and Managerial Myopia," Scholarly Articles 3708937, Harvard University Department of Economics.
  10. Borokhovich, Kenneth A & Brunarski, Kelly R & Parrino, Robert, 1997. " CEO Contracting and Antitakeover Amendments," Journal of Finance, American Finance Association, vol. 52(4), pages 1495-1517, September.
  11. Lucian Arye Bebchuk, 2002. "The Case Against Board Veto in Corporate Takeovers," NBER Working Papers 9078, National Bureau of Economic Research, Inc.
  12. Linn, Scott C. & McConnell, John J., 1983. "An empirical investigation of the impact of `antitakeover' amendments on common stock prices," Journal of Financial Economics, Elsevier, vol. 11(1-4), pages 361-399, April.
  13. Prescott, Edward C & Visscher, Michael, 1980. "Organization Capital," Journal of Political Economy, University of Chicago Press, vol. 88(3), pages 446-61, June.
  14. Gerald T. Garvey & Gordon Hanka, 1999. "Capital Structure and Corporate Control: The Effect of Antitakeover Statutes on Firm Leverage," Journal of Finance, American Finance Association, vol. 54(2), pages 519-546, 04.
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