The Probability to Abolish Governance Provisions

摘要

The negative relation between governance indices and acquisition performance weakens in the post Sarbanes-Oxley Act (SOX) period. We examine whether firms remove anti-takeover provisions to eliminate the adverse impact of anti-takeover provisions. We find that strong external monitoring mechanisms such as the presence of public pension funds and large institutional investors leads firms to abolish some anti-takeover provisions and classified boards in particular. This partial elimination of anti-takeover provisions suggests a trade-off between benefit and cost of anti-takeover provisions.