Economic effects of first generation state antitakeover statutes on target firm shareholders

Abstract

The presumption in the legal and economics literature has been that first generation state antitakeover statutes had a significant impact on the takeover process. This paper examines the effect of the first generation state antitakeover statutes by estimating the impact of these laws on gains to target firms in a sample of 232 target firms that received tender offers. The empirical results indicate that state antitakeover laws may have delayed the takeover process, but the delays did not result in significant increases in gains to target shareholders. This result may have obtained because the Federal antitakeover law (i.e., the Williams Act) provides target management with an effective delaying mechanism that most probably renders the delays available through the state regulatory process redundant.