Poison Pills, Optimal Contracting and the Market for Corporate Control: Evidence from Fortune 500 Firms
نویسندگان
چکیده
The rationale for issuing poison pill securities remains unclear, despite the findings of a large body of prior research that these defenses adversely affect shareholder wealth. This paper investigates the hypothesis that the adoption of such defenses may reflect shareholders’ desire to contract efficiently with their managers in an environment characterized by hostile takeovers and uncertainty about the managers’ true performance. Unlike previous research, we focus on financial characteristics of firms as they relate to the motives for adopting such defenses. Our empirical research does not support the optimal contacting hypothesis. We interpret our results as supportive of the managerial entrenchment hypothesis.
منابع مشابه
Insider Entrenchment and CEO Compensation in Entrepreneurial Firms: An Empirical Investigation
Insider Entrenchment and CEO Compensation in Entrepreneurial Firms: An Empirical Investigation By Arno Forst, Ph.D. A Dissertation submitted in partial fulfillment of the requirements for the degree of Doctor of Philosophy in Business at Virginia Commonwealth University. Virginia Commonwealth University, 2009 Chair: Dr. Benson Wier Professor, Department of Accounting This study investigates the...
متن کاملA Perspective on Promoter Ownership and Market Reaction to Corporate News: Evidence from India
C orporate governance structures in the wake of observed differences in firm ownership structures in developed markets and emerging market economies are distinct. In this paper, we examine the effect of an ownership structure of firms on the market reaction to corporate news flows in the context of emerging market economies like India. We observe the price and volume movements associ...
متن کاملAn Empirical Investigation of the Impact of Intellectual Capital on Firms’ Market Value and Financial Performance: Evidence from Iranian Companies
In modern economics, Intellectual capital is described as an intangible asset which can be used as a source of sustainable competitive advantage. However, intellectual capital components have to interact in themselves to create value. The paper seeks to examine the impact of intellectual capital on firms’ market value and financial performance. The efficiency of the value added by corporate int...
متن کاملFact and Fiction in Corporate Law and Governance
INTRODUCTION..................................................................................................... 1325 I. CONTRACTING AT THE IPO STAGE ................................................................. 1331 A. IPO Charters and Takeover Defenses ...................................................... 1332 B. Innovation, Diversity, and the “Plain Vanilla” Charter ......................
متن کاملCanadian Evidence on Market for Corporate Control: Its Disciplinary Role on Ineficient Managers
This study suggests the Canadian market for corporate control penalizes sub-optimal management. High turnover rates are observed for the Canadian top managers (Chief Executive Officers (CEOs) or presidents) in the target firms and executives who have been replaced are less likely to find similar executive positions in other public firms. In addition, this study shows target firms usually have p...
متن کامل