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The Rise of Anti-activist Poison Pills

Author

Listed:
  • Eldar, Ofer

    (Duke University)

  • Kirmse, Tanja

    (Drexel University)

  • Wittry, Michael D.

    (Ohio State University)

Abstract

We provide the first systematic evidence of contractual innovation in the terms of poison pill plans. In response to the increase in hedge fund activism, pills have changed to include anti-activist provisions, such as low trigger thresholds and acting-in-concert provisions. Using unique data on hedge fund views of SEC filings as a proxy for the threat of activists' interventions, we show that hedge fund interest predicts pill adoptions. Moreover, the likelihood of a 13D filing declines after firms adopt anti-activist pills, suggesting that pills are effective in deterring activists. The results are particularly strong for "NOL" pills that due to tax laws have a five percent trigger. Our analysis has implications for understanding the modern dynamics of market discipline of managers in public corporations and evaluating policies that regulate defensive tactics.

Suggested Citation

  • Eldar, Ofer & Kirmse, Tanja & Wittry, Michael D., 2022. "The Rise of Anti-activist Poison Pills," Working Paper Series 2022-07, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
    • Handle: RePEc:ecl:ohidic:2022-07
    DOI: 10.2139/ssrn.4198367
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    More about this item

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law

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