Working Paper: CEPR ID: DP12059
Authors: Vicente Cunat; Mireia Gine; Maria Guadalupe
Abstract: We study the causal effects of anti-takeover provisions on takeovers. We decompose their effect on prices, takeover likelihood and target selection and explore the channels through which they change shareholders’ value. We provide causal estimates based on shareholder proposals and deal with the endogenous selection of targets through bounding techniques. Voting to remove an anti-takeover provision increases the annual takeover probability by 0.9% and increases premiums by 2.8%. The premium effect is driven by more related acquisitions, better matching and higher synergies when targets are less protected. We do not find evidence of a trade-off between premiums and takeover probabilities.
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Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Voting to remove an antitakeover provision (G34) | Increases competition among bidders for less protected firms (L11) |
| Increased competition among bidders for less protected firms (G34) | Leads to more unsolicited bids (D44) |
| Increased competition among bidders for less protected firms (G34) | Greater likelihood of cash transactions (E41) |
| Antitakeover provisions (G34) | Reduce both takeover probabilities and premiums (G34) |
| Voting to remove an antitakeover provision (G34) | Increases the annual probability of a takeover (G34) |
| Voting to remove an antitakeover provision (G34) | Raises the expected takeover premium (G34) |