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Why Firms Adopt Antitakeover Arrangements

  • Lucian Arye Bebchuk

Firms going public have increasingly been incorporating antitakeover provisions in their IPO charters, while shareholders of existing companies have increasingly been voting in opposition to such charter provisions. This paper identifies possible explanations for this empirical pattern. Specifically, I analyze explanations based on (1) the role of antitakeover arrangements in encouraging founders to break up their initial control blocks, (2) efficient private benefits of control, (3) agency problems among pre-IPO shareholders, (4) agency problems between pre-IPO shareholders and their IPO lawyers, (5) asymmetric information between founders and public investors about the firm's future growth prospects, and (6) bounded attention and imperfect pricing at the IPO stage.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10190.

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Date of creation: Dec 2003
Date of revision:
Publication status: published as Bebchuk, Lucian A. “Why Firms Adopt Antitakeover Arrangements." University of Pennsylvania Law Review 152 (2003): 713-753.
Handle: RePEc:nbr:nberwo:10190
Note: CF LE
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