Blood in the water: The value of antitakeover provisions during market shocks

Scott Guernsey, Simone M. Sepe and Matthew Serfling

Journal of Financial Economics, 2022, vol. 143, issue 3, 1070-1096

Abstract: During market-wide shocks that cause large drops in stock prices, firms with more state-endorsed antitakeover provisions (ATPs) experience smaller declines in value. Two channels appear to drive this finding. First, by giving boards more bargaining power to fight opportunistic bids, firms with more ATPs extract higher takeover premiums during market shocks. Second, having more ATPs attenuates the effect of market shocks on firm value by protecting relationship-specific investments with stakeholders from disruptive takeovers. Our results suggest that ATPs benefit shareholders during market shocks when firm values are abnormally low and represent one advantage of incorporating in states with more ATPs.

Keywords: Antitakeover provisions; Market shocks; Firm value; Takeover premiums; Relationship-specific investments (search for similar items in EconPapers)
JEL-codes: G14 G32 G34 K22 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0304405X21005377
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:143:y:2022:i:3:p:1070-1096

DOI: 10.1016/j.jfineco.2021.12.009

Access Statistics for this article

Journal of Financial Economics is currently edited by G. William Schwert

More articles in Journal of Financial Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().