The 1990 Pennsylvania Antitakeover Law: Should Firms Opt Out of Antitakeover Legislation?

Swartz, Lee Mick

doi:10.1177/0148558x9601100205

Cited by 8 publications

(3 citation statements)

References 24 publications

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“…Staggered boards are shown to increase substantially the likelihood that a target receiving a hostile bid would remain independent. 23 Szewczyk and Tsetsekos (1992), Karpoff and Malatesta (1990), and Swartz (1996) all found that passage of the Pennsylvania statute was accompanied by a substantial reduction in the value of Pennsylvania firms. Ryngaert and Netter (1990) reached a similar conclusion with respect to the passage of the Ohio legislation.…”

Section: Extreme Statutesmentioning

confidence: 99%

Firms' Decisions Where to Incorporate

Bebchuk¹,

Cohen²

2002

108

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This paper empirically investigates the determinants of firms' decisions where to incorporate. We find that states that offer stronger antitakeover protections are substantially more successful both in retaining in-state firms and in attracting out-ofstate incorporations. We estimate that, compared with adopting no antitakeover statutes, adopting all standard antitakeover statutes enabled the adopting states to more than double the percentage of local firms that incorporated in state (from 23 to 49 percent). Indeed, we find no evidence that the incorporation market has even penalized the three states that passed antitakeover statutes, which are widely viewed as detrimental to shareholders. We also find that there is commonly a big difference between a state's ability to attract incorporations from firms located in and out of the state, and we investigate several possible explanations for this home-state advantage.

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Section: Extreme Statutesmentioning

confidence: 99%

Firms' Decisions Where to Incorporate

Bebchuk¹,

Cohen²

2002

108

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“…Other estimates of the advantage to opting out are higher. For example, Swartz (1996) finds that firms that opted out had 18 percent higher stock returns than firms that did not opt out over a 190‐day event window containing passage of the Act.…”

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confidence: 99%

New Evidence on the Market for Directors: Board Membership and Pennsylvania Senate Bill 1310

Coles¹,

Hoi²

2003

The Journal of Finance

183

101

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We examine the relation between a board's decision to reject antitakeover provisions of Pennsylvania Senate Bill 1310 and subsequent labor market opportunities of those same board members. Compared to directors retaining all provisions, directors rejecting all protective provisions of SB1310 are three times as likely to gain additional external directorships and are 30 percent more likely to retain their internal slot on the board of that same Pennsylvania company. For external board seats, the results are driven by nonexecutive directors who are not members of the management team; for internal board seats, the results are driven by executive directors.LABOR MARKET DISCIPLINEFBY MEANS of ex post settling upFcan motivate managers and directors to act in the interests of the shareholders of the firms they serve (e.g., Fama and Jensen (1983)). If the labor market, either internal to the firm or externally, provides opportunities that managers and directors care about, and the availability of those opportunities is sensitive to ''on-the-job'' performance, then the incentives of managers and directors will be aligned, at least somewhat, with shareholder interests. On the other hand, if performance has little connection to future opportunities, then the incentive effects of the labor market are minimal and shareholders must rely on other mechanisms to align the incentives of managers and directors with shareholder interests.In this paper, we use the passage of Pennsylvania Senate Bill 1310 (hereafter SB1310, Act, or Bill) and related events to investigate the operation of the labor market for directors. In particular, we study the relation between the decision by boards of Pennsylvania companies covered by the Bill to reject or retain antitakeover provisions of SB1310 and subsequent service by those board members as directors. Our study is quite broad in that we include both executive and nonexecutive directors and subsequent service both on the board of the relevant Pennsylvania firm and on boards of other companies.The sample contains approximately 1,000 directors of the Pennsylvania firms examined in Szewczyk and Tsetsekos (1992) and Wahal,Wiles, and Zenner (1995). We track the board service of these directors for three years following the enactment of SB1310. We find a statistically significant and economically important relation between a board's decision to reject or retain protective provisions of the Act and directors' subsequent service on boards of directors.On average, directors of firms that rejected all or some of the law's antitakeover provisions gain external directorships over the three years after SB1310. This effect is driven by the subsample of nonexecutive directors 1 (i.e., directors who are not CEO, president, chairman, a family member, or any other current or recent member of management), and the effect is not statistically significant in the subsample of executive directors. In our multivariate formulation, nonexecutive directors are almost three times as likely to obtain at least one additiona...

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“…Yet, most studies find that bidder gains are either insignificant or slightly negative when the target is publicly listed. The potential reasons for this perplexing outcome include takeover regulation (Jarrell and Bradley, 1980;Swartz, 1996;Humphery-Jenner, 2012), anticipation of the transaction (Cai et al, 2011), negative signal about the acquirer's share price (Asquith et al, 1983;Myers and Majluf, 1984;Travlos, 1987;Shleifer and Vishny, 2003;Jensen, 2005), negative signal about the acquirer's internal growth prospects (McCardle and Viswanathan, 1994;Jovanovic and Braguinsky, 2002), competition among bidders (Bradley et al, 1988;Jarrell and Poulsen, 1989), price pressure from merger arbitrage (Mitchell et al, 2004), managerial optimism (Heaton, 2002), managerial mistake (Weston et al, 2004), hubris and overconfidence (Roll, 1986;Malmendier and Tate, 2008) and agency problems (Jensen, 1986;Morck et al, 1990;Jensen, 2005;Masulis et al, 2007;Baker et al, 2012;Harford et al, 2012;Phalippou et al, 2015).…”

Section: Literature Reviewmentioning

confidence: 99%

Returns to acquirers of listed and unlisted targets: an empirical study of Australian bidders

Nguyên

Rahman

Zhao

2017

SEF

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Purpose This paper aims to evaluate the robustness of the listing effect in Australia, that is whether acquisitions of private firms create more value to the bidding firm’s shareholders than acquisitions of publicly listed firms. Design/methodology/approach The authors analyze the market reaction to the announcement of takeover bids initiated by Australian public firms on private and public targets over the period 1990-2011. The analysis controls for a wide range of bidder, deal and target country characteristics that are likely to correlate with the target’s listing status and acquirer abnormal returns. The authors also use a selection model to address the endogenous choice of the target’s listing status. Findings The results indicate that bidders experience significantly higher abnormal returns of about 1.7 per cent in the 11-day event window when the target is a private firm. The authors show that this result is broad-based and persistent. It does not appear to depend on whether the target is small or large; whether it is related or unrelated to the bidder’s industry; whether it is in the resources sector; and whether the transaction is domestic or cross-border. They find some evidence that bidder returns might be stronger for larger acquisitions, for unrelated targets, and in poor market conditions such as in the wake of the recent global financial crisis. Research limitations/implications The research would benefit from the inclusion of the bidding firm’s ownership and governance characteristics. Practical implications The results support the view that market frictions contribute to make private firms attractive targets. Originality/value The analysis confirms the pervasiveness of the listing effect in a market characterized by a lesser degree of competition, higher search costs and the significance of the natural resources sector.

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The 1990 Pennsylvania Antitakeover Law: Should Firms Opt Out of Antitakeover Legislation?

Cited by 8 publications

References 24 publications

Firms' Decisions Where to Incorporate

Firms' Decisions Where to Incorporate

New Evidence on the Market for Directors: Board Membership and Pennsylvania Senate Bill 1310

Returns to acquirers of listed and unlisted targets: an empirical study of Australian bidders

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