Do Antitakeover Provisions Spur Corporate Innovation? A Regression Discontinuity Analysis

We study the effect of antitakeover provisions (ATPs) on innovation. To establish causality, we use a regression discontinuity approach that relies on locally exogenous variation generated by shareholder proposal votes. We find a positive, causal effect of ATPs on innovation. This positive effect is...

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Bibliographic Details
Published inJournal of financial and quantitative analysis Vol. 53; no. 3; pp. 1163 - 1194
Main Authors Chemmanur, Thomas J., Tian, Xuan
Format Journal Article
LanguageEnglish
Published New York, USA Cambridge University Press 01.06.2018
Subjects
Asymmetric information
Asymmetry
Causality
Discontinuity
Econometrics
Equity
Hypotheses
Innovations
Markets
Meetings
Moral hazard
Public companies
Quantitative analysis
Shareholder voting
Stockholders
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ISSN0022-1090
1756-6916
DOI10.1017/S0022109018000029

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Summary:We study the effect of antitakeover provisions (ATPs) on innovation. To establish causality, we use a regression discontinuity approach that relies on locally exogenous variation generated by shareholder proposal votes. We find a positive, causal effect of ATPs on innovation. This positive effect is more pronounced in firms that are subject to a larger degree of information asymmetry and operate in more competitive product markets. The evidence suggests that ATPs help nurture innovation by insulating managers from short-term pressures arising from equity markets. Finally, the number of ATPs contributes positively to firm value for firms involved in intensive innovation activities.
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ISSN:0022-1090
1756-6916
DOI:10.1017/S0022109018000029