Title: Valuation effects from implementing shareholder-friendly poison pill provisions

Authors: Charmaine Glegg, Jeff Madura

Addresses: Department of Finance, College of Business, East Carolina University, East Fifth St., Greenville, NC 27858, USA. ' Barry Kaye College of Business, Florida Atlantic University, 777 Glades Rd., Boca Raton, Fl 33431, USA

Abstract: Poison pill adoptions may have varying effects on firm value. Shareholder-friendly pills have been adopted by firms in recent years, but have not been thoroughly examined in the financial literature. We find that the adoption of shareholder-friendly pills results in favourable valuation effects. The adoption of poison pills classified as unfriendly does not elicit a significant market response. Valuation effects are conditioned on the type of pills within the friendly or unfriendly category. Sunset and TIDE provisions elicit more favourable market responses than other friendly pills, while dead hand provisions elicit a less favourable market response than other unfriendly pills.

Keywords: poison pills; firm value; valuation effects; market response; shareholder rights plans; hostile takeovers.

DOI: 10.1504/IJCG.2008.020632

International Journal of Corporate Governance, 2008 Vol.1 No.2, pp.207 - 225

Published online: 05 Oct 2008 *

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