CEO characteristics, CEO contracting and the value impact of antitakeover practices

초록

In this paper, we examine how a firm’s adoption of antitakeover provisions (ATPs) is associated with important CEO contractual terms and certain CEO characteristics. Previous studies suggest that a firm adopts its ATPs at the optimal level to enhance the firm value given its stakeholder relationships, CEO contracting environment and certain CEO characteristics. We propose two hypotheses to explain the relationships between firm value and antitakeover practices and their interactions with the CEO characteristics and the contracting environment: the Efficient Contracting Hypothesis and the Specific CEO Hypothesis. We find evidence which is consistent with these two hypotheses. First, we find that CEO characteristics including CEO age and founder CEO status are associated with both a firm’s antitakeover practices and the valuation effects of ATP adoption. Second, we find that firms with certain contracting characteristics with the CEO such as signing bonuses and termination agreements also tend to adopt higher levels of antitakeover provisions. Finally, we find that IPO firms with more ATPs are associated with higher firm values, contrary to the agency view of ATPs. Our results appear that ATPs are set optimally to enhance firm value, depending on CEO characteristics and the CEO contracting environment.

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