The effect of poison pill securities on shareholder wealth

Abstract This paper examines empirical evidence about the effect of poison pill takeover defenses on shareholder wealth. I find evidence that announcements of the most restrictive forms of the pill defense are associated with stock price declines. Also, the most restrictive forms of the pill defense are associated with abnormally high rates of defeat of unsolicited tender offers. Although this evidence is consistent with managerial entrenchment, the evidence implies that, on average, poison pill defenses have seemingly had only a modest effect on firm valuation.

[1]  Harry DeAngelo,et al.  Standstill agreements, privately negotiated stock repurchases, and the market for corporate control , 1983 .

[2]  E. Fama,et al.  Separation of Ownership and Control , 1983, The Journal of Law and Economics.

[3]  Michael Bradley,et al.  Interfirm Tender Offers and the Market for Corporate Control , 1980 .

[4]  J. Pound,et al.  The Effects of Antitakeover Amendments on Takeover Activity: Some Direct Evidence , 1987, The Journal of Law and Economics.

[5]  M. Rosenzweig,et al.  Defensive Stock Repurchases , 1986 .

[6]  E. Fama.  Agency Problems and the Theory of the Firm , 1980, Journal of Political Economy.

[7]  H. DeAngelo,et al.  Antitakeover charter amendments and stockholder wealth , 1983 .

[8]  F. Easterbrook,et al.  The Proper Role of a Target's Management in Responding to a Tender Offer , 1981 .

[9]  H. Manne,et al.  Mergers and the Market for Corporate Control , 1965, Journal of Political Economy.

[10]  A. Shleifer,et al.  Large Shareholders and Corporate Control , 1986, Journal of Political Economy.

[11]  Theo Vermaelen,et al.  Common stock repurchases and market signalling: An empirical study☆ , 1981 .

[12]  Michael J. Fishman.  Preemptive Bidding and the Role of the Medium of Exchange in Acquisitions , 1989 .

[13]  Richard S. Ruback,et al.  The Market for Corporate Control: The Scientific Evidence , 2002 .

[14]  M. C. Jensen,et al.  Harvard Business School; SSRN; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI); Harvard University - Accounting & Control Unit , 1976 .

[15]  R. Roll,et al.  The Hubris Hypothesis of Corporate Takeovers , 1986 .

[16]  Annette B. Poulsen,et al.  Shark repellents and stock prices: The effects of antitakeover amendments since 1980 , 1987 .

[17]  Michael Bradley,et al.  THE RATIONALE BEHIND INTERFIRM TENDER OFFERS Information or Synergy , 1983 .

[18]  David T. Brown.  The Construction of Tender Offers: Capital Gains Taxes and the Free Rider Problem , 1988 .

[19]  G. Jarrell.  The Wealth Effects of Litigation by Targets: Do Interests Diverge in a Merge? , 1985, The Journal of Law and Economics.

[20]  Sanford J. Grossman,et al.  The free-rider problem and the theory of the corporation , 1980 .

[21]  G. Jarrell,et al.  Two-tier and negotiated tender offers: The imprisonment of the free-riding shareholder , 1987 .

[22]  Robert W. Vishny,et al.  Greenmail, White Knights, and Shareholders' Interest , 1986 .

[23]  S. Linn,et al.  An empirical investigation of the impact of ‘antitakeover’ amendments on common stock prices , 1983 .

[24]  G. Jarrell,et al.  Do Targets Gain from Defeating Tender offers , 1984 .