Defending Against Hostile Takeovers: Impact on Shareholder Wealth

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Abstract
Innovations in takeover financing, less restrictive regulatory requirements, and a general desire to enhance market position have led to a substantial increase in corporate takeover and restructuring activity. In response target firm managers have become increasingly active in devising defensive strategies and tactics designed to ward off hostile bidders. It is well‐ documented, however, that large wealth gains accrue to target firm shareholders in mergers and acquisitions. Thus the emergence of such terms as “shark repellents”, “poison pills”, and “greenmail”, raises the question of whose best interests are really being served by antitakeover measures.