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Crisis Poison Pills

Author

Listed:
  • Ofer Eldar
  • Michael D. Wittry

Abstract

We show that a large number of firms adopt poison pills during periods of market turmoil. Specifically, during the coronavirus pandemic, many firms adopted poison pills following declines in valuations, and stock prices increased upon the announcement of firms’ poison pill adoption. Stock price increases are driven by (1) firms in which activist shareholders acquire ownership stakes and (2) firms in industries that had high exposure to the crisis. Likewise, we find a positive reaction to pills with provisions directed at stalling activists’ interventions. Our results suggest that crisis pills that target potentially disruptive ownership changes may benefit current shareholders. (JEL G30, G32, G34, G38, E32)Received August 14, 2020; editorial decision October 23, 2020 by Editor Andrew Ellul. Authors have furnished an Internet Appendix,which is available on the Oxford University Press Web site next to the link to the final published paper online.

Suggested Citation

  • Ofer Eldar & Michael D. Wittry, 2021. "Crisis Poison Pills," The Review of Corporate Finance Studies, Society for Financial Studies, vol. 10(1), pages 204-251.
    • Handle: RePEc:oup:rcorpf:v:10:y:2021:i:1:p:204-251.
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    File URL: http://hdl.handle.net/10.1093/rcfs/cfaa024
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    Cited by:

    1. Guernsey, Scott & Sepe, Simone M. & Serfling, Matthew, 2022. "Blood in the water: The value of antitakeover provisions during market shocks," Journal of Financial Economics, Elsevier, vol. 143(3), pages 1070-1096.
    2. Gatchev, Vladimir A. & Pirinsky, Christo A. & Zhao, Mengxin, 2022. "Attitudes towards business and corporate governance," Journal of Corporate Finance, Elsevier, vol. 75(C).

    More about this item

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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