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Do Antitakeover Provisions Spur Corporate Innovation? A Regression Discontinuity Analysis

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  • Chemmanur, Thomas J.
  • Tian, Xuan

Abstract

We study the effect of antitakeover provisions (ATPs) on innovation. To establish causality, we use a regression discontinuity approach that relies on locally exogenous variation generated by shareholder proposal votes. We find a positive, causal effect of ATPs on innovation. This positive effect is more pronounced in firms that are subject to a larger degree of information asymmetry and operate in more competitive product markets. The evidence suggests that ATPs help nurture innovation by insulating managers from short-term pressures arising from equity markets. Finally, the number of ATPs contributes positively to firm value for firms involved in intensive innovation activities.

Suggested Citation

  • Chemmanur, Thomas J. & Tian, Xuan, 2018. "Do Antitakeover Provisions Spur Corporate Innovation? A Regression Discontinuity Analysis," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 53(3), pages 1163-1194, June.
    • Handle: RePEc:cup:jfinqa:v:53:y:2018:i:03:p:1163-1194_00
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