An empirical investigation of the effect of corporate charter antitakeover amendments on stockholder wealth
Article Abstract:
The management entrenchment hypothesis holds that top management imposes antitakeover amendments to lower job risk and protect compensation levels, even if it comes at the expense of stockholders' interests. On the other hand, an alternative hypothesis holds that such amendments are beneficial to stockholders since they are instituted to allow management to extract higher bid prices from potential acquirers. An examination of 409 firms that adopted such amendments in the period between 1974 and 1988 lends credence to the management entrenchment hypothesis by showing that stockholders' interests were not generally served by the adoption of antitakeover amendments. As such, the study proves that antitakeover amentments only serve to transfer operational control from stockholders to top management and are often not in the long-term interest of publicly quoted firms.
Publication Name: Strategic Management Journal
Subject: Business
ISSN: 0143-2095
Year: 1993
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Corporate governance within the context of antitakeover provisions
Article Abstract:
Corporate governance relationships are examined through a longitudinal study of six antitakeover options. These provisions, both those that require and do not require stockholder approval, are a poison pill provision, fair price provisions, classified board provisions, supermajority requirements, unequal voting rights, and the scrapping of shareholder voting rights. Agency theory is used to examine how the adoption of these six options is affected by three governance factors, namely, managerial equity ownership, corporate board structure and institutional investor holdings. Analysis of data drawn from 185 companies between 1984 and 1988 reveals that stockholder approval of antitakeover provisions determines the impact of the three governance variables on these provisions. The implications of the results are discussed.
Publication Name: Strategic Management Journal
Subject: Business
ISSN: 0143-2095
Year: 1996
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Board structure, antitakeover provisions, and stockholder wealth
Article Abstract:
Previous studies on market reactions to antitakeover measures were extended by considering the impact of an internal governance mechanism, specifically the corporate board. The focus of this study was to test the hypothesis that a strong board tends to lower the negative wealth effects related to the introduction of antitakeover provisions. Data was gathered from a sample of 261 Standard and Poor's 500 firms that used 486 antitakeover provisions between 1984 and 1988. Findings revealed that although the separation of positions between CEO and board chairperson minimizes the negative effect, greater outsider representation boosts negative market reaction. Implications of the results are discussed.
Publication Name: Strategic Management Journal
Subject: Business
ISSN: 0143-2095
Year: 1997
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