Scandinavian Working Papers in Economics

Working Papers,
Copenhagen Business School, Department of Finance

No 2002-5: Impact of Takeover Defenses on Managerial Incentives

Caspar Rose
Additional contact information
Caspar Rose: Department of Finance, Copenhagen Business School, Postal: Department of Finance, Copenhagen Business School, Solbjerg Plads 3, A5, DK-2000 Frederiksberg, Denmark

Abstract: The article studies how takeover defenses influence managerial incentives with respect to long term investments, excess liquidity and the amount of debt relative to equity. The article conducts a cross-sectional regression based on a sample of Danish listed firms, dealing explicitly with the problem of causation between the variables. Takeover defenses adopted by Danish firms mainly consist of shares with dual class voting rights often in combination with foundation ownership. The article finds that protected firms have significantly less debt to equity. However, protected firms are not significantly more oriented towards the long-term and do not have significantly more excess liquidity.

Keywords: Takeover Defenses; Company Law; Corporate Control; Corporate Governance; Simultaneous Equation Estimation

JEL-codes: C31; G32; G34; K22

37 pages, July 1, 2002

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