ABSTRACT
This chapter focuses on the relationship between takeover defenses and the financial characteristics of the firms that adopt these defenses. Harry DeAngelo and Edward M. Rice, while examining a sample of New York Stock Exchange listed firms adopting anti-takeover amendments during 1971–1979, found statistically insignificant abnormal stock returns around the announcement of such amendments. This chapter analyzes the relationship in light of two competing hypotheses: the presence of anti-takeover amendments is consistent with shareholders initiating such amendments to maximize their wealth, versus the hypothesis that the manager is solely responsible for initiating measures to insulate himself from the market for corporate control. It provides the arguments for why anti-takeover amendments should relate to certain financial characteristics of the firm. The chapter aims to define the various kinds of anti-takeover amendments, and describes the two data sets which are juxtaposed to provide appropriate measures of takeover defenses and firm characteristics.
