The Lifecycle Effects of Corporate Takeover Defenses

67 Pages Posted: 13 Jul 2016 Last revised: 12 Jul 2021

See all articles by William C. Johnson

William C. Johnson

University of Massachusetts Lowell - The Robert J. Manning School of Business

Jonathan M. Karpoff

University of Washington - Michael G. Foster School of Business; European Corporate Governance Institute (ECGI)

Sangho Yi

Sogang University; affiliation not provided to SSRN

Date Written: July 5, 2021

Abstract

We document that the relation between firm value and the use of takeover defenses is positive for young firms but becomes negative as firms age. This value reversal pattern reflects specific changes in the costs and benefits of takeover defenses as firms age and arises because defenses are sticky and rarely removed. Firms can attenuate the value reversal by removing defenses, but do so only when the defenses become very costly and adjustment costs are low. The value reversal explains previous mixed evidence about takeover defenses and implies that firm age proxies for takeover defenses’ heterogeneous impacts on firm value.

Keywords: Takeover defenses, antitakeover provisions, value reversal, lifecycle

JEL Classification: G34, K22, L14

Suggested Citation

Johnson, William C. and Karpoff, Jonathan M. and Yi, Sangho and Yi, Sangho, The Lifecycle Effects of Corporate Takeover Defenses (July 5, 2021). Forthcoming, The Review of Financial Studies, European Corporate Governance Institute – Finance Working Paper 761/2021, Available at SSRN: https://ssrn.com/abstract=2808208 or http://dx.doi.org/10.2139/ssrn.2808208

William C. Johnson (Contact Author)

University of Massachusetts Lowell - The Robert J. Manning School of Business ( email )

One University Avenue
Lowell, MA 01854
United States

Jonathan M. Karpoff

University of Washington - Michael G. Foster School of Business ( email )

Box 353226
Seattle, WA 98195-3200
United States
206-685-4954 (Phone)
206-221-6856 (Fax)

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Sangho Yi

affiliation not provided to SSRN

Sogang University ( email )

Seoul 121-742
Korea, Republic of (South Korea)
82-2-705-8864 (Phone)

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