The impact of rights plans on proxy contests: Reevaluating Moran v. Household International

Communication Costs, Information Acquisition, and Voting Decisions in Proxy Contests

“…That is not quite true in practice. In Thomas and Martin's (1994) sample, approximately 20 per cent of proxy contests were "settled". This means that the introduction of another stage in the game, a stage where the manager decides to "settle" with a dissident or he decides to take the fight to the shareholders, would be fruitful.…”

“…Using a logit regression, Thomas and Martin (1994) find that in the period 1985-1991 the incidence of Rights Plans actually increased the probability of a dissident's win. Their conjectured hypothesis for this surprising result was a signaling hypothesis: since only firms with "inefficient" managers adopt Rights Plans, one should expect more dissident wins in such firms.…”

“…--assuming n > m --is consistent with these findings. Pound (1988) found that the chances of a dissident win increased with his shareholdings, but Thomas and Martin (1994) found this relationship to be insignificant. It is possible that Thomas and Martin (1994) analyzed a data set where the effect of s d was not monotonic (as predicted by Proposition 4).…”

“…A popular metric in some empirical papers on proxies (Pound (1988) and Thomas and Martin (1994)) is the likelihood of a dissident win given that a proxy contest takes place. Denote this by ?.…”

“…Over one-half of America's largest corporations have adopted Rights Plans or Poison Pills (Thomas and Martin (1994)). This involves the issuance of share purchase rights as a pro rata dividend.…”