Poison or Placebo
Evidence on the Deterrence and Wealth Effects of Modern Antitakeover Measures
G. William Schwert
University of Rochester, Rochester, NY 14627
and National Bureau of Economic Research
Journal of Financial Economics, 39 (September 1995) 3-43.
This paper provides large-sample evidence that poison pill rights issues,
control share laws, and business combination laws have not systematically
deterred takeovers and are unlikely to have caused the demise of the 1980s
market for corporate control, even though 87% of all exchange-listed firms
are now covered by one of these antitakeover measures. We show that poison
pills and control share laws are reliably associated with higher takeover
premiums for selling shareholders, both unconditionally and conditional on
a successful takeover, and we provide updated event study evidence for the
three-quarters of all poison pills not yet analyzed. Antitakeover measures
increase the bargaining position of target firms, but they do not prevent
Key words: Poison pill, Antitakeover law, Merger, Tender offer, Takeover
JEL Classifications: G34, G38
Cited 368 times in the SSCI and SCOPUS through 2019
© Copyright 1995, Elsevier
A full-text version of this paper, including tables and figures, is available
in Acrobat's portable data format (.pdf).
Click here to download the reprint
of the poison pill paper.
Fig. 1 Monthly time series plot of proportion of
all exchange-listed firms that are covered by (1) control share laws, (2)
business combination laws, (3) poison pill rights issues, (4) any of the
above, and (5) the proportion of all exchange-listed firms that received
initial merger proposals, merger agreements, or inter-firm tender offers
each month during 1975-91 (left-hand scale).
Fig. 2 Number of cash-only and securities-only
successful takeovers of exchange-listed firms in the period 1975-91, by
year of announcement.
Fig. 3 Monthly time series plot of the spread between
the junk (less than Baa) and Aaa corporate bond yields and the proportion
of all exchange-listed firms that received initial merger proposals, merger
agreements, or inter-firm tender offers each month, 1975-91 (left-hand scale).
Fig. 4 Number of initial poison pill adoptions
by year for all exchange-listed firms in the period 1984-91. Also, market
share of large law firms used in pill adoptions. The 'big-two' law firms
are Wachtell Lipton and Skadden Arps. The 'next-seven' law firms are Fried
Frank Harris, Sullivan Cromwell, Cravath Swaine, Paul Weiss, Wilkie Farr,
Shearman Sterling, and Jones Day.
Fig. 5 Event study showing the cumulative proportion
of firms receiving merger and acquisition (M&A) announcements within a year
of the date of adoption of an initial poison pill, for 960 exchange-listed
firms that adopted pills in the period 1983-90. The dotted line shows the
cumulative fraction, over corresponding two-year periods, for exchange-listed
firms that never adopted a poison pill. M&A announcements include merger
proposals, merger agreements, and inter-firm tender offers, regardless of
The poison pill sample used in this paper is available in an Excel spreadsheet:
[if you use these data for purposes of publication, please cite the
source of the data]
- an Excel spreadsheet here. This file is
- an Excel spreadsheet compressed as a ZIP file here.
This file is about 42K.
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