Anti-takeover Provisions as a Source of Innovation and Value Creation

M. Humphery-Jenner

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Managers are risk averse. Excessive risk-aversion can destroy shareholder wealth. A key source of risk is the threat of an opportunistic takeover designed to take advantage of depressed market prices. This is especially the case in innovative or hard-to-value (`HtV') companies whose price may be depressed due to valuation difficulties rather than managerial under-performance. For these HtV firms, the threat of an opportunistic takeover can destroy value by inducing agency con icts of managerial risk aversion. managers and regulators argue that ATPs can ameliorate this problem. This article presents a theoretical model and empirical results that show that for HtV firms, ATPs encourage managers to make value-creating takeovers and increase innovation and do not induce agency con icts of managerial entrenchment. This implies that for innovative or hard-to-value firms, ATPs can ameliorate managerial risk aversion and encourage value-creation.
Original languageEnglish
Place of PublicationTilburg
Publication statusPublished - 2011

Publication series

NameCentER Discussion Paper


  • Takeovers
  • Acquisitions
  • Valuation
  • Governance
  • Managerial
  • Risk Aversion
  • Innovation


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