Author Abstract
We examine whether and why managers strengthen antitakeover provisions when facing an increased threat of being acquired. Our tests exploit the Inevitable Disclosure Doctrine (IDD), which exogenously decreases knowledge-worker mobility, thereby increasing firms’ likelihood of being acquired. Managers respond by increasing specific antitakeover provisions, especially when employees have greater ex-ante mobility. Firms that strengthen antitakeovers experience a reduced takeover likelihood. Cross-sectional tests indicate that firms with higher innovative activity increase antitakeovers more after IDD, and those that do, experience greater ex-post innovation outcomes. Our results are consistent with managers increasing antitakeovers to protect long-term innovation output rather than for private benefits.
Paper Information
- Full Working Paper Text
- Working Paper Publication Date: March 2019
- HBS Working Paper Number: HBS Working Paper #19-102
- Faculty Unit(s): Accounting and Management
