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Management Quality and Antitakeover Provisions


Management Quality and Antitakeover Provisions

Chemmanur, Thomas J., Paeglis, Imants and Simonyan, Karen (2011) Management Quality and Antitakeover Provisions. Journal of Law and Economics, 54 (3). pp. 651-692. ISSN 00222186

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management_quality_and_antitakeover_provisions.pdf - Published Version

Official URL: http://dx.doi.org/10.1086/655805


We present the first empirical analysis of the relationship between a firm’s management quality and the prevalence of antitakeover provisions in its corporate charter and their influence on initial public offering (IPO) valuation and post-IPO performance. We test the implications of the managerial entrenchment hypothesis, which implies that antitakeover provisions serve only to enhance the control benefits of incumbent management, and the long-term value creation hypothesis, which implies that such provisions can enhance value in the hands of higher quality management. We find that, first, firms with higher quality management and greater growth options are associated with a greater number of antitakeover provisions. Second, firms with higher management quality and a greater number of antitakeover provisions outperform other firms in the sample in terms of post-IPO operating and stock return performance and obtain higher IPO valuations. Our findings reject the managerial entrenchment hypothesis and support the long-term value creation hypothesis.

Divisions:Concordia University > John Molson School of Business > Finance
Item Type:Article
Authors:Chemmanur, Thomas J. and Paeglis, Imants and Simonyan, Karen
Journal or Publication:Journal of Law and Economics
Digital Object Identifier (DOI):10.1086/655805
ID Code:974528
Deposited On:06 Aug 2012 20:39
Last Modified:18 Jan 2018 17:38
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