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Post-Bid Takeover Resistance: Antitakeover Provisions, Initial Offer Quality, and Target Board Motivation

Unlike Britain and many E.U. countries, it is the board of a U.S. takeover target firm that decides on post-bid resistance. In this context, we investigate the causal impact of existing antitakeover provisions (ATPs) and initial offer quality on the target-board’s decision to resist post-bid. Exploiting instrumental variables, we find a positive relationship from existing ATPs to post-bid resistance, and no causal relationship from initial offer quality to post-bid resistance. We argue that this necessarily implies that the target-board’s decision to resist is, on average, not motivated by good-faith bargaining in stockholder interest. Instead, it is indicative of entrenchment considerations.