During market-wide shocks that cause large drops in stock prices, firms with more state-endorsed antitakeover provisions (ATPs) experience smaller declines in value. Two channels appear to drive this finding. First, by giving boards more bargaining power to fight opportunistic bids, firms with more ATPs extract higher takeover premiums during market shocks. Second, having more ATPs attenuates the effect of market shocks on firm value by protecting relationship-specific investments with stakeholders from disruptive takeovers. Our results suggest that ATPs benefit shareholders during market shocks when firm values are abnormally low and represent one advantage of incorporating in states with more ATPs.
- Antitakeover provisions
- Firm value
- Market shocks
- Relationship-specific investments
- Takeover premiums
ASJC Scopus subject areas
- Economics and Econometrics
- Strategy and Management
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Guernsey, S. (Contributor), Sepe, S. M. (Contributor) & Serfling, M. (Creator), MURI/AUSMURI Project: Rationalization of Interphase Instabilities during Thermo-Mechanical Gyrations Typical, 2022