Corporate Governance, Shareholder Rights, and Shareholder Rights Plans: Poison, Placebo, or Prescription?

We examine the effect of poison pill adoptions on firm value, controlling for the adopting firm's preexisting corporate governance structure. We find that only companies with the most democratic governance structures, defined as those with the fewest preexisting protective governance provisions...

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Bibliographic Details
Published in:Journal of financial and quantitative analysis 2008-06, Vol.43 (2), p.381-400
Main Authors: Caton, Gary L., Goh, Jeremy
Format: Article
Language:English
Subjects:
Analytical forecasting
Anti takeover strategy
Boards of directors
Business management
Business structures
Business studies
Corporate governance
Earnings
Financial management
Government relations
Growth rate
Ownership and control
Quantitative analysis
Shareholder rights plans
Shareholders
Stock returns
Stockholders
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Summary:We examine the effect of poison pill adoptions on firm value, controlling for the adopting firm's preexisting corporate governance structure. We find that only companies with the most democratic governance structures, defined as those with the fewest preexisting protective governance provisions, experience significantly positive abnormal stock returns and significantly positive abnormal revisions in five-year earnings growth rate forecasts. Moreover, regression results indicate that abnormal returns and forecast revisions are significantly related to governance structure and not to board composition or subsequent merger activity.
ISSN:0022-1090
1756-6916
DOI:10.1017/S0022109000003562