Yuri Gomes Paiva Azevedo, Lucas Allan Diniz Schwarz, Hellen Bomfim Gomes, Marcelo Augusto Ambrozini
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As proxies of poison pills, the authors employ the “conventional” poison pills in their baseline models and the “eternity” poison pills, which prevent the removal of poison pills from bylaws, in additional models.</p><!--/ Abstract__block -->\n<h3>Findings</h3>\n<p>The authors find that stock price crash risk measures are not associated with poison pill adoption. However, although stock price crash risk does not lead to poison pill adoption as a complementary corporate governance mechanism that protects firms against hostile takeover attempts, further results show that managers do not draw on stock price crash risk as a pretext to entrench themselves. Additional analyses also highlight that CEO power seems to play a role in moderating the relationship between stock price crash risk and eternity poison pill adoption.</p><!--/ Abstract__block -->\n<h3>Originality/value</h3>\n<p>The authors contribute to the literature on stock price crash risk, which calls for research in international contexts to better understand the effect of stock price crash risk on country-specific idiosyncratic features. The authors discuss a controversial anti-takeover mechanism that has been debated by Brazilian policymakers.</p><!--/ Abstract__block -->","PeriodicalId":51698,"journal":{"name":"International Journal of Managerial Finance","volume":null,"pages":null},"PeriodicalIF":1.8000,"publicationDate":"2022-07-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":"{\"title\":\"Stock price crash risk and the adoption of poison pills: evidence from Brazil\",\"authors\":\"Yuri Gomes Paiva Azevedo, Lucas Allan Diniz Schwarz, Hellen Bomfim Gomes, Marcelo Augusto Ambrozini\",\"doi\":\"10.1108/ijmf-02-2022-0077\",\"DOIUrl\":null,\"url\":null,\"abstract\":\"<h3>Purpose</h3>\\n<p>The purpose of this paper is to examine the effect of stock price crash risk on the adoption of poison pills.</p><!--/ Abstract__block -->\\n<h3>Design/methodology/approach</h3>\\n<p>The authors estimate logit and probit regressions. Their sample includes 185 Brazilian public firms for the period 2010–2018. Following previous studies, the authors use the negative skewness of firm-specific weekly returns and the down-to-up volatility of firm-specific weekly returns as measures of firm's stock price crash risk. As proxies of poison pills, the authors employ the “conventional” poison pills in their baseline models and the “eternity” poison pills, which prevent the removal of poison pills from bylaws, in additional models.</p><!--/ Abstract__block -->\\n<h3>Findings</h3>\\n<p>The authors find that stock price crash risk measures are not associated with poison pill adoption. However, although stock price crash risk does not lead to poison pill adoption as a complementary corporate governance mechanism that protects firms against hostile takeover attempts, further results show that managers do not draw on stock price crash risk as a pretext to entrench themselves. Additional analyses also highlight that CEO power seems to play a role in moderating the relationship between stock price crash risk and eternity poison pill adoption.</p><!--/ Abstract__block -->\\n<h3>Originality/value</h3>\\n<p>The authors contribute to the literature on stock price crash risk, which calls for research in international contexts to better understand the effect of stock price crash risk on country-specific idiosyncratic features. 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Stock price crash risk and the adoption of poison pills: evidence from Brazil
Purpose
The purpose of this paper is to examine the effect of stock price crash risk on the adoption of poison pills.
Design/methodology/approach
The authors estimate logit and probit regressions. Their sample includes 185 Brazilian public firms for the period 2010–2018. Following previous studies, the authors use the negative skewness of firm-specific weekly returns and the down-to-up volatility of firm-specific weekly returns as measures of firm's stock price crash risk. As proxies of poison pills, the authors employ the “conventional” poison pills in their baseline models and the “eternity” poison pills, which prevent the removal of poison pills from bylaws, in additional models.
Findings
The authors find that stock price crash risk measures are not associated with poison pill adoption. However, although stock price crash risk does not lead to poison pill adoption as a complementary corporate governance mechanism that protects firms against hostile takeover attempts, further results show that managers do not draw on stock price crash risk as a pretext to entrench themselves. Additional analyses also highlight that CEO power seems to play a role in moderating the relationship between stock price crash risk and eternity poison pill adoption.
Originality/value
The authors contribute to the literature on stock price crash risk, which calls for research in international contexts to better understand the effect of stock price crash risk on country-specific idiosyncratic features. The authors discuss a controversial anti-takeover mechanism that has been debated by Brazilian policymakers.
期刊介绍:
Treasury and Financial Risk Management ■Redefining, measuring and identifying new methods to manage risk for financing decisions ■The role, costs and benefits of insurance and hedging financing decisions ■The role of rating agencies in managerial decisions Investment and Financing Decision Making ■The uses and applications of forecasting to examine financing decisions measurement and comparisons of various financing options ■The public versus private financing decision ■The decision of where to be publicly traded - including comparisons of market structures and exchanges ■Short term versus long term portfolio management - choice of securities (debt vs equity, convertible vs non-convertible)