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Do anti-takeover devices affect the takeover likelihood or the takeover premium?

Martin Holmen, Eugene Nivorozhkin and Rakesh Rana

The European Journal of Finance, 2014, vol. 20, issue 4, 319-340

Abstract: In this paper, we use Heckman selection models to analyse the relation between the likelihood of the firm becoming a takeover target, the takeover premium, and the use of anti-takeover devices. Ordinary least squares regressions suggest that anti-takeover devices, especially dual class shares, are associated with a higher takeover premium. However, we also document that anti-takeover devices reduce the likelihood that the firm will be taken over. When we control for the fact that takeover targets are selected, we do not find a significant relation between the takeover premium and dual class shares. Hence, our results suggest that the takeover premium is indeed influenced by private information about the likelihood of takeover.

Date: 2014
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DOI: 10.1080/1351847X.2012.703141

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