Anti‐takeover techniques and corporate ownership structure

Abstract

Purpose – The purpose of this paper is to analyze the role of large equity ownership by both institutions and outside block shareholders in monitoring the board of directors’ decision to initially adopt defense mechanisms and the subsequent capital market reaction to the adoption.Design/methodology/approach – This paper employs an empirical methodology that controls for selection bias. Multiple regressions were employed to assess the relationship among the variables.Findings – Stockholder wealth effects of poison pills are positively related to pressure‐resistant institutions, which is consistent with effective monitoring. The wealth effects of poison pills, however, are negatively related to pressure‐sensitive investors, consistent with passivity. No empirical relation was found between ownership structure and shareholder approved amendments such as classified boards and fair price amendments.Research limitations/implications – This study was conducted as a large sample analysis over an earlier time peri...