Corporate Financial Performance and the Use of Takeover Defenses
This paper tests the hypothesis that the threat of a contested takeover improves corporate performance. This is done by a cross-sectional analysis of listed Danish firms with and without effective takeover defenses. Takeover defenses adopted by Danish firms mainly consist of dual class voting rights often in combination with foundation ownership. Using simultaneous equation estimation to deal with the problem of causation, the results show that unprotected firms do not outperform protected firms. This suggests that management in unprotected firms are disciplined by other corporate governance mechanisms than the market for corporate control, including the legal protection of shareholders.
|Date of creation:||30 Apr 2001|
|Date of revision:|
|Contact details of provider:|| Postal: Department of Finance, Copenhagen Business School, Solbjerg Plads 3, A5, DK-2000 Frederiksberg, Denmark|
Phone: +45 3815 3815
Web page: http://www.cbs.dk/departments/finance/
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- Jensen, Michael C. & Ruback, Richard S., 1983. "The market for corporate control : The scientific evidence," Journal of Financial Economics, Elsevier, vol. 11(1-4), pages 5-50, April.
- Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-29, May.
- Johnson, Mark S & Rao, Ramesh P, 1997. "The Impact of Antitakeover Amendments on Corporate Financial Performance," The Financial Review, Eastern Finance Association, vol. 32(4), pages 659-89, November.
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