Senator Williams' Three Takeover Bills: The Effect on Listings and Stock Returns

Abstract

The Williams Act, originally viewed as hindering the market for corporate control and hurting shareholders, may have fostered collectively optimal shareholder behavior and encouraged exchange listings. The major exchanges supported passage of the Williams Act, and the NYSE had itself previously regulated tender offers by member firms. Passage of the 1968 act was followed by a substantial increase in public registrations and in NYSE and AMEX listings, especially in industries with proportionately more tender offers. The introduction and passage of this legislation was also associated with significant stock-price increases of firms in tender offer-intensive industries. The 1970 amendment, which stipulated tighter 5 percent disclosure, was largely opposed by the NYSE and NASD (but not the AMEX), and major announcement dates leading to its passage were accompanied by relative stock price declines of firms in tender offer-intensive industries.

JEL Classification: G2, G3