Do Antitakeover Provisions Spur Corporate Innovation? A Regression Discontinuity Analysis. (11th April 2018)

• Record Type: Journal Article
• Authors: Chemmanur, Thomas J.; Tian, Xuan
• Is Part Of: Journal of financial and quantitative analysis. Volume 53:Number 3(2018)
• Page Start: 1163
• Page End: 1194
• Publication Date: 2018-04-11
• Subjects: Finance -- Periodicals; Investments -- Mathematics -- Periodicals; 332.05
• DOI: 10.1017/S0022109018000029
• Languages: English
• ISSNs: 0022-1090

Abstract

Abstract : 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.