The Value of Takeover Defenses and the Interaction Effects of Firm Characteristics

Abstract

The value of takeover defenses changes with different firm characteristics. In the paper, I examine the interactions of firm characteristics with the value of takeover defenses. The results show that the relationship between firm value and takeover defenses differs in firm age, monitoring costs, advising needs, and their interactions. Takeover defenses are not necessarily more detrimental for older firms. Instead, takeover defenses are more harmful for older firms with higher monitoring costs, but the adverse impact is positively moderated for older firms with higher advising needs. Thus, the influence of firm age on the value of takeover defenses depends on a firm’s monitoring costs and advising needs. The findings of the paper present consistent evidence that takeover defenses have a heterogeneous impact for firms with different firm characteristics.