Why Firms Adopt Antitakeover Arrangements

Lucian Bebchuk ()

No 10190, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Firms going public have increasingly been incorporating antitakeover provisions in their IPO charters, while shareholders of existing companies have increasingly been voting in opposition to such charter provisions. This paper identifies possible explanations for this empirical pattern. Specifically, I analyze explanations based on (1) the role of antitakeover arrangements in encouraging founders to break up their initial control blocks, (2) efficient private benefits of control, (3) agency problems among pre-IPO shareholders, (4) agency problems between pre-IPO shareholders and their IPO lawyers, (5) asymmetric information between founders and public investors about the firm's future growth prospects, and (6) bounded attention and imperfect pricing at the IPO stage.

JEL-codes: G30 G34 (search for similar items in EconPapers)
Date: 2003-12
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Published as Bebchuk, Lucian A. “Why Firms Adopt Antitakeover Arrangements." University of Pennsylvania Law Review 152 (2003): 713-753.

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