Financial institution default frequencies and takeover defenses

Elizabeth Webb

Studies in Economics and Finance, 2007, vol. 24, issue 4, 286-296

Abstract: Purpose - The purpose of this paper is to examine the relationship between estimated default frequencies (EDFs) and a government index that proxies for takeover defense provisions for publicly‐traded financial institutions from 2002 to 2004. Design/methodology/approach - Using a sample of publicly‐traded financial institutions, the effect of anti‐takeover provisions on EDFs was analyzed. Findings - It was found that financial institutions with multiple takeover defenses tend to have lower EDFs compared with those with fewer takeover defenses. This result is robust to a variety of specifications and is supportive of the wealth distribution hypothesis. Further, it appears that the result is primarily driven by non‐depository institutions. This may imply that regulation of depository institutions mitigates takeover defense effects on managerial behavior. Originality/value - This paper adds to the corporate finance literature, which reports mixed findings on the relationships between takeover defenses and firm value.

Keywords: Financial institutions; Default; Take‐overs; Corporate governance (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eme:sefpps:v:24:y:2007:i:4:p:286-296

DOI: 10.1108/10867370710831837

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