The relative number of anti-takeover provisions and the market for corporate control

Using propensity score matching, we provide new evidence of a nonmonotonic relation between the number of anti-takeover provisions (ATPs) a firm adopts, relative to peer-matched firms, and takeover likelihood. Firms with either a relatively low or high number of ATPs are significantly less likely to be a takeover target. We argue that this outcome is a result of the expected benefits versus costs of targeting firms in the left and right tails of the peer-matched ATP distribution. In particular, firms in the left tail with a relatively small number of ATPs tend to have high market valuations, indicative of management optimizing shareholder welfare and hence being less concerned about the threat of a takeover. Overall, our findings have important implications for both corporate and regulatory policy.