An analysis of the stock price effects of antitakeover amendment proposals

This study examines the stock price effects of corporate antitakeover amendment proposals. The results are based on 763 amendments proposed between 1980 and 1984 by 325 firms listed on either the New York or American stock exchanges. --Tests for a non-zero average stock price effect are performed fo...

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Author: Victoria Bauerlein McWilliams
Degree Work Type: Dissertation
Institution: University of Oregon
Format: Degree Work
Published: 1988
Summary: This study examines the stock price effects of corporate antitakeover amendment proposals. The results are based on 763 amendments proposed between 1980 and 1984 by 325 firms listed on either the New York or American stock exchanges. --Tests for a non-zero average stock price effect are performed for the entire sample and for various subsets of interest. For the entire sample, I find a positive but insignificant reaction at the time the amendment proposal is announced and a significant positive reaction during the period from porposal announcement through outcome. This suggests that the amendments, on average, benefit shareholders. An analysis based on firms categorized according to the type of amendment proposed shows that no type of amendment is more beneficial or more harmful than any other type. Furthermore, I find that the presence of takeover activity prior to amendment proposal does not confound the interpretation of the average stock price reaction. Finally, I find that the amendments are viewed as more beneficial when proposed by firms whose managers have a relatively low ownership stake in the firm's shares than when proposed by firms whose managers have a higher ownership stake. This supports a theory presented by Stulz (1986). --A variety of regression models are examined to determine whether individual firms' stock price reactions can be explained using independent variables which primarily measure managers' economic ties to the firm. I find a significant negative relation between the price reaction and the percent of shares owned by managers, but this relation has little explanatory power. In general the regression relationships examined are not statistically significant and yield little in the way of new insights.
Physical Description: 101p