The impact of preventive takeover defences on corporate financial performance: Evidence from the US

Gimede Gigante and Ottavio Angioni

Finance Research Letters, 2023, vol. 55, issue PA

Abstract: This study investigates the impact on financial performances of preventive takeover defences in S&P500 firms from 2017 to 2021. This study aims to study takeover defences impact on non-market performance indicators. Previous research is not extensive, and it provides contradictory evidence focusing more on market-related measures. Four shark repellents' impact on ROE, ROA, CAPEX and EBIT were studied. Panel data pooled OLS models results highlight that takeover defences impact is heterogeneous. Firstly, there is a negative correlation between takeover defences and profitability indicators, supporting the managerial entrenchment hypothesis. In particular, few defences directly cause a reduction in ROE. Other negative relations damage shareholders. Secondly, directors' removal limitations are positively correlated with long-term investments: in line with the shareholders' interest hypothesis. Finally, the combination of different takeover defences has a moderating effect on the initial impact. This study contributes to the debate on the harmfulness of takeover defences and provides insights to firms and regulators on the best defence to adopt.

Keywords: Antitakeover provision; Takeover defence; Corporate governance; Market for corporate control; Mergers and acquisitions (search for similar items in EconPapers)
JEL-codes: C33 G30 G32 G34 G38 K22 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:55:y:2023:i:pa:s154461232300209x

DOI: 10.1016/j.frl.2023.103836

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