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The effects of antitakeover provisions on acquisition targets

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  • Sokolyk, Tatyana

Abstract

This study provides large sample evidence on the effects of antitakeover provisions (ATPs) on takeover probability and premia in modern takeover contests. Despite the fact that hostile bids are uncommon during the 1990s-2000s, some ATPs have strong but opposing effects on takeover outcomes. Consistent with recent theory, the staggered board-poison pill combination is the strongest antitakeover mechanism. Takeover compensation arrangements reduce managerial resistance to takeovers, and many commonly used ATPs are irrelevant in modern takeover battles. Furthermore, compensation plans are associated with higher takeover premia. Although individual ATPs have significant effects on takeover outcomes, the G-Index, which does not account for the diverse effects of ATPs, is not significant in predicting the firm's takeover probability or the size of takeover premia.

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  • Sokolyk, Tatyana, 2011. "The effects of antitakeover provisions on acquisition targets," Journal of Corporate Finance, Elsevier, vol. 17(3), pages 612-627, June.
  • Handle: RePEc:eee:corfin:v:17:y:2011:i:3:p:612-627
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    2. Caiazza, Stefano & Pozzolo, Alberto Franco, 2016. "The determinants of failed takeovers in the banking sector: Deal or country characteristics?," Journal of Banking & Finance, Elsevier, vol. 72(S), pages 92-103.
    3. Bebchuk, Lucian & Cohen, Alma & Wang, Charles C.Y., 2014. "Golden Parachutes and the Wealth of Shareholders," Journal of Corporate Finance, Elsevier, pages 140-154.
    4. Min, Byung-Seong, 2013. "Evaluation of board reforms: An examination of the appointment of outside directors," Journal of the Japanese and International Economies, Elsevier, pages 21-43.
    5. Ertugrul, Mine, 2015. "Bargaining power of targets: Takeover defenses and top-tier target advisors," Journal of Economics and Business, Elsevier, pages 48-78.
    6. Tatyana Sokolyk, 2015. "Governance provisions and managerial entrenchment: evidence from CEO turnover of acquiring firms," Review of Quantitative Finance and Accounting, Springer, vol. 45(2), pages 305-335, August.
    7. repec:eee:riibaf:v:42:y:2017:i:c:p:992-1004 is not listed on IDEAS
    8. Goktan, M. Sinan & Kieschnick, Robert, 2012. "A target's perspective on the effects of ATPs in takeovers after recognizing its choice in the process," Journal of Corporate Finance, Elsevier, pages 1088-1103.
    9. Wang, Ying & Lahr, Henry, 2017. "Takeover law to protect shareholders: Increasing efficiency or merely redistributing gains?," Journal of Corporate Finance, Elsevier, pages 288-315.
    10. Simonyan, Karen, 2014. "What determines takeover premia: An empirical analysis," Journal of Economics and Business, Elsevier, pages 93-125.

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