The Effects of Takeover Defenses: Evidence from Closed-End Funds
43 Pages Posted: 10 Feb 2016 Last revised: 11 Feb 2016
Date Written: September 2, 2015
I use a sample of closed-end funds to examine how takeover defenses impact shareholder value and promote managerial entrenchment. These funds use the same defenses as general corporations but provide an ideal, homogeneous environment for testing their effects. Defenses are associated with lower fund market values, weaker reactions to activist 13D filings, and higher compensation levels for both fund managers and directors. This study provides greater clarity on the unresolved impact of takeover defenses on firm value, while showing for the first time that directors, who are responsible for adopting takeover defenses, financially benefit from their use.
Keywords: Takeover defenses, executive compensation, discounts, closed-end funds
JEL Classification: G12, G34
Suggested Citation: Suggested Citation