The Effects of Takeover Defenses: Evidence from Closed-End Funds

43 Pages Posted: 10 Feb 2016 Last revised: 11 Feb 2016

See all articles by Matthew E. Souther

Matthew E. Souther

University of South Carolina - Darla Moore School of Business

Date Written: September 2, 2015

Abstract

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

Souther, Matthew, The Effects of Takeover Defenses: Evidence from Closed-End Funds (September 2, 2015). Journal of Financial Economics (JFE), Forthcoming, Available at SSRN: https://ssrn.com/abstract=2729874

Matthew Souther (Contact Author)

University of South Carolina - Darla Moore School of Business ( email )

1705 College St
Francis M. Hipp Building
Columbia, SC 29208
United States

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