Do antitakeover provisions harm shareholders?

Abstract

We reexamine the negative relation between firm value and the number of antitakeover provisions a firm has in place. We document that firms with characteristics indicating low power to bargain for favorable terms in a takeover, but also indicating high potential agency costs, have more antitakeover provisions in place. We also find that for these firms, Tobin's Q increases in the number of adopted provisions. These findings are robust to several methods that control for endogeneity. Our evidence suggests that adopting more antitakeover provisions is beneficial for certain firms and challenges the commonplace view that antitakeover provisions are universally harmful for shareholders.