Antitakeover provisions and investment in mergers and acquisitions: a causal reevaluation

Nicholas F. Carline, Sridhar Gogineni

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Abstract

In this study, we are the first to reevaluate causally the effects of antitakeover provisions (ATPs) on the likelihood and quality of investment in mergers and acquisitions (M&A). We do so by exploiting instrumental variables to circumvent evidential endogeneity in ATPs. Our causal analysis is new to reveal that higher levels of ATPs are associated with lower propensity for investment in M&A and, after accounting for unobservable factors that affected the decision to invest in M&A, with investment that is more likely to be both value enhancing to shareholders and personally riskier to managers. Our findings support theory and evidence in other corporate contexts that gives weight to the possibility that ATPs curb risk related agency conflict. Our collective findings of a (positive) surprise also provide substantiation for known information about ATPs having value relevance for market perception of the quality of investment in M&A.
Original languageEnglish
Article number101962
JournalJournal of Corporate Finance
Volume69
Early online date19 Apr 2021
DOIs
Publication statusPublished - Aug 2021

Bibliographical note

Publisher Copyright:
© 2021 Elsevier B.V.

Keywords

  • Antitakeover provisions
  • Causality
  • Mergers and acquisitions
  • Risk related agency conflict

ASJC Scopus subject areas

  • Business and International Management
  • Finance
  • Economics and Econometrics
  • Strategy and Management

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