Research Seminar: Eliezer M. Fich, Drexel University

Title: The effect of takeover protection on the value of cash: Evidence from a natural experiment, by Eliezer M.Fich, Jarrad Harford, and Adam S. Yore
Event Research Seminar
Event information
Date 4th November 2016
Time 1:00pm - 2:00pm
Venue ICMA Centre, Whiteknights campus
Event types:
Research Seminars

Abstract: Shareholders’ updated valuation of internal slack reveals their revised assessment of potential agency conflicts. We study how the value of internal cash changes following state antitakeover regulation events. After carefully addressing the critiques of such experiments, we find that the value of cash increases following antitakeover law implementation, but there is considerable heterogeneity in how the value changes. Firms more susceptible to quiet-life agency problems show no increases in the market-assessed value of internal slack. Conversely, cash appreciates in companies where takeover protection helps bond important commitments with major counterparties. These findings hold across different measures of antitakeover protection events.

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