The commitment value of takeover defenses

William C. Johnson, Sungwoo Nam and Sangho Yi

The European Journal of Finance, 2019, vol. 25, issue 1, 79-100

Abstract: We investigate how takeover defenses can facilitate a firm’s value-increasing stakeholder relationships by bonding its commitment to respect stakeholders’ appropriable quasi-rents in the firm. For this purpose, we develop two variations of the B-index of takeover defenses which are specifically designed to capture the bonding benefit of takeover defenses. We find evidence that some takeover defenses, but not all, provide a bonding benefit in terms of facilitation of a firm’s value-increasing stakeholder relationships. This implies that a firm must selectively adopt the most effective takeover defenses to achieve the desired corporate goals.

Date: 2019
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DOI: 10.1080/1351847X.2018.1481444

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