AN ANALYSIS OF THE DECISION TO OPT OUT OF PENNSYLVANIA SENATE BILL 1310

Abstract

AbstractPennsylvania Senate Bill 1310 protects firms from unsolicited takeover bids. It was signed into law on April 27, 1990, and gave firms ninety days to opt out of all or some of its provisions. During the twenty months before the Bill's introduction, firms choosing protection outperformed firms opting out of at least one provision. Institutions owned a greater percentage of shares of firms opting out of select provisions of the Bill, indicating that shareholder pressure influenced the opt‐out decision. No significant differences are found in share price performance, CEO turnover, or restructurings during the twenty months following the last opt‐out date. But firms opting out exhibit superior accounting performance two years after the Bill's enactment.