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The commitment value of takeover defenses

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  • William C. Johnson
  • Sungwoo Nam
  • Sangho Yi

Abstract

We investigate how takeover defenses can facilitate a firm’s value-increasing stakeholder relationships by bonding its commitment to respect stakeholders’ appropriable quasi-rents in the firm. For this purpose, we develop two variations of the B-index of takeover defenses which are specifically designed to capture the bonding benefit of takeover defenses. We find evidence that some takeover defenses, but not all, provide a bonding benefit in terms of facilitation of a firm’s value-increasing stakeholder relationships. This implies that a firm must selectively adopt the most effective takeover defenses to achieve the desired corporate goals.

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  • William C. Johnson & Sungwoo Nam & Sangho Yi, 2019. "The commitment value of takeover defenses," The European Journal of Finance, Taylor & Francis Journals, vol. 25(1), pages 79-100, January.
    • Handle: RePEc:taf:eurjfi:v:25:y:2019:i:1:p:79-100
    DOI: 10.1080/1351847X.2018.1481444
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    Cited by:

    1. Malhotra, Shavin & Morgan, Horatio M. & Zhu, Pengcheng, 2020. "Corporate governance and firms’ acquisition behavior: The role of antitakeover provisions," Journal of Business Research, Elsevier, vol. 118(C), pages 26-37.

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