Publication Type
Working Paper
Publication Date
4-2016
Abstract
This paper examines the interplay between takeover defenses and shareholder activism. Using a comprehensive sample of shareholder activism events between 2006 and 2014, I find a differential impact of takeover defense measures on the likelihood of being targeted for activism; a dual-class structure or a staggered board deters activism, whereas firms with a poison pill in place are more likely to become targets. Activists are more likely to demand removal of takeover defense measures and/or sale of the target firm if the firm has a staggered board or a poison pill in place, suggesting that when takeover defenses block the market for corporate control, activists promote changes through their interventions. I also find that target firms with takeover defenses are more likely to remove those defenses and more likely to be acquired following activism, which suggests that activism can act as an antidote to takeover defenses. Finally, while many target firms adopt a poison pill in response to activist approaches, I do not find evidence that it makes for an effective defense.
Keywords
Shareholder Activism, Hedge Fund Activism, Takeover Defense, Staggered Board, Classified Board, Shareholder Rights Plan, Poison Pill, Dual-class Shares
Discipline
Business and Corporate Communications | Corporate Finance
Research Areas
Corporate Reporting and Disclosure
Identifier
10.2139/ssrn.2842695
Citation
SHIN, Sa-Pyung Sean.
Takeover defenses in the era of shareholder activism. (2016).
Available at: https://ink.library.smu.edu.sg/soa_research/1578
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
http://doi.org/10.2139/ssrn.2842695