State antitakeover legislation and firm financial policy

William N. Pugh and John S. Jahera
Additional contact information
William N. Pugh: College of Business, Auburn University, AL, USA, Postal: College of Business, Auburn University, AL, USA
John S. Jahera: College of Business, Auburn University, AL, USA, Postal: College of Business, Auburn University, AL, USA

Managerial and Decision Economics, 1997, vol. 18, issue 7-8, 681-692

Abstract: In the wake of numerous hostile corporate takeover attempts in the 1980s, many states enacted antitakeover legislation, often as a direct response to a particular takeover effort in the specific state. A number of empirical studies assess the impact of such statutes on firm value using traditional event methodology. While the event type research may capture the immediate market assessment of the impact of such legislation, the legislation can affect longer term financial policies of the affected firms. Theorists have speculated that firms less exposed to a takeover threat are more likely to pursue a longer term investment strategy, that leverage may substitute for or complement other existing takeover defenses, and that protected firms may require additional external monitoring. The results of this study indicate that protected firms increase both capital expenditures and R&D relative to assets and sales. Further, there are increases in dividends but only small changes in leverage. Firms with antitakeover amendments in place prior to the legislation show lower increases in capital spending and R&D, and modest evidence of a greater tendency to increase debt levels. While these results indicate that the laws influence subsequent firm strategy, that does not necessarily mean that these changes in policy improve firm value. © 1997 John Wiley & Sons, Ltd.

Date: 1997
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:mgtdec:v:18:y:1997:i:7-8:p:681-692

DOI: 10.1002/(SICI)1099-1468(199711/12)18:7/8<681::AID-MDE856>3.0.CO;2-2

Access Statistics for this article

Managerial and Decision Economics is currently edited by Antony Dnes

More articles in Managerial and Decision Economics from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley Content Delivery ().