Takeover defenses: Entrenchment and efficiency

• 成果类型: Article
• 署名作者: Bhojraj, Sanjeev; Sengupta, Partha; Zhang, Suning
• 署名单位: Cornell University; United States Department of the Treasury; Office of the Comptroller of the Currency; University of Iowa
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/jjacceco.2016.12.001
• 发表日期: 2017
• 关键词: real activities manipulation; earnings management; ANTITAKEOVER AMENDMENTS; corporate governance; STAGGERED BOARDS; SHARK REPELLENTS; AGENCY COSTS; MARKET; performance; investors

摘要

This paper explores the potential role of anti-takeover provisions (ATPs) in long-term value creation. Using a change in the legal environment in Delaware as an exogenous event, we document that a subset of firms with a relatively longer term focus (innovative firms) benefit from ATPs. Particularly, these firms experience an increase in Tobin's Q following a state law change in Delaware that increases the effectiveness of ATPs in defending against hostile takeovers. This increase is greater than that for non-innovative firms in Delaware as well as for innovative firms outside Delaware. Furthermore, the innovative firms in Delaware experience a stronger positive market reaction around the state law change dates, relative to other firms. Finally, in a cross-sectional setting we find that innovative firms with above-average takeover protection outperform other firms and are less likely to engage in harmful real earnings management. Taken together, these results provide empirical evidence of potential benefits of ATPs and help explain why such protection continues to be prevalent in the United States. (C) 2016 Elsevier B.V. All rights reserved.