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The relative number of anti‐takeover provisions and the market for corporate control

Ivan Obaydin, Ralf Zurbruegg, Paul Brockman and Grant Richardson

Journal of Financial Research, 2021, vol. 44, issue 2, 279-298

Abstract: Using propensity score matching, we provide new evidence of a nonmonotonic relation between the number of anti‐takeover provisions (ATPs) a firm adopts, relative to peer‐matched firms, and takeover likelihood. Firms with either a relatively low or high number of ATPs are significantly less likely to be a takeover target. We argue that this outcome is a result of the expected benefits versus costs of targeting firms in the left and right tails of the peer‐matched ATP distribution. In particular, firms in the left tail with a relatively small number of ATPs tend to have high market valuations, indicative of management optimizing shareholder welfare and hence being less concerned about the threat of a takeover. Overall, our findings have important implications for both corporate and regulatory policy.

Date: 2021
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https://doi.org/10.1111/jfir.12241

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Persistent link: https://EconPapers.repec.org/RePEc:bla:jfnres:v:44:y:2021:i:2:p:279-298

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Journal of Financial Research is currently edited by Jayant Kale and Gerald Gay

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