Framing Controversial Actions: Regulatory Focus, Source Credibility, and Stock Market Reaction to Poison Pill Adoption

Abstract

We contribute to the research on organizational accounts by examining the role of different framing languages and the credibility of the frame articulator on justifying controversial organizational actions. Drawing on regulatory focus theory and the literature on source credibility, we develop novel arguments as to how a gains-versusnonlosses framing and the perceived credibility of the speaker influence stakeholder responses, as well as how the effectiveness of these aspects is influenced by context. We test our arguments using data on the framing of the adoption of "poison pills" by U.S. firms between 1983 and 2008. Using content analysis and an event study, we find that a gains framing aligned with the dominant institutional logic leads to a positive stock market reaction, while statements emanating from speakers with potentially selfserving interests negatively affect the stock market reaction. Our findings further show that the effectiveness of framing and source credibility are dependent on contextual attributes such as speaker visibility, prior performance, and practice prevalence.

POISON PILLS AND EARNINGS MANAGEMENT: AN INVESTIGATION IN BM&FBOVESPA’S “NOVO MERCADO” COMPANIES

“…As poison pills destacam-se dentre os mecanismos de proteção de controle acionário, tanto por ser considerada a mais significativa inovação ocorrida na área de finanças corporativas desde a década de 1980de (BRUNER, 1991, quanto pelas controvérsias que envolvem sua adoção (JARRELL; BRICKLEY; NETTER, 1988;BRUNER, 1991;RHEE;FISS, 2014 Popularizadas com a grande quantidade de takeovers ocorridos durante a década de 1980 nos Estados Unidos, em sua maioria hostis, as poison pills são definidas por Jarrell, Brickley e Netter (1988) como um conjunto de direitos conferidos aos acionistas que, na ocorrência de um evento que possa alterar a atual configuração de controle da empresa, confere aos atuais acionistas controladores direitos de aquisição de ações adicionais ou de venda de ações para os potenciais adquirentes em termos altamente vantajosos, impondo, dessa forma, significativas penalidades econômicas aos adquirentes hostis. De forma mais simplificada, as poison pills podem ser definidas como cláusulas estatutárias que buscam dificultar a ocorrência de takeover hostil ao aumentar drasticamente o custo potencial que um comprador agressivo terá que pagar para completar a transação (DAVIS, 1991;RHEE;FISS, 2014).…”

“…De forma mais simplificada, as poison pills podem ser definidas como cláusulas estatutárias que buscam dificultar a ocorrência de takeover hostil ao aumentar drasticamente o custo potencial que um comprador agressivo terá que pagar para completar a transação (DAVIS, 1991;RHEE;FISS, 2014).…”

Interpreting Equivocal Signals: Market Reaction to Specific-Purpose Poison Pill Adoption

“…The sample size is comparable to prior studies on poison pill adoption (Rhee & Fiss, 2014). In our sample, 40 firms adopted poison pills for NOL tax purposes, whereas 108 firms adopted in-play poison pills.…”

Executive remuneration principles, practices and processes: an institutional logics perspective

“…Heugens and Otten (2007) found that multiple Logics are embedded in the recommendations of corporate governance codes from around the globe, although there were differences between countries. In the USA, studies have documented a shift from Corporate Logic to Agency Logic (Jung, 2014;Rhee and Fiss, 2014;Zajac and Westphal, 2004), although this transition has been contested (Fiss, Kennedy and Davis, 2012;Green et al, 2008) and has given rise to practices that symbolically conform to Agency Logic (Joseph, Ocasio and McDonnell, 2014;Westphal and Graebner, 2010;Zajac and Westphal, 2004). More recently, there are signs that there has been a shift towards Corporate Logic (Westphal and Park, 2012) and Stakeholder Logic (Ioannou and Serafeim, 2015).…”

“…Other countries have also experienced a shift towards Agency Logic including Canada (Shipilov et al, 2010), Germany (Chizema, 2008(Chizema, , 2010Chizema and Buck, 2006;Fiss andZajac, 2004, 2006;Sanders and Tushke, 2007), Japan (Desender, Aguilera, Lopezpuertas-Lamy and Cerspi, 2016;Morris, Hassard and McCann, 2008), Netherlands (Bezemer, Zajac, Naumovska, van den Bosch and Volberda, 2015) and the UK (Ezzamel, Willmott and Worthington, 2008;Lok, 2010), although these countries are still experiencing an institutional battle between Logics with evidence of symbolic practices (e.g. Fiss andZajac, 2004, 2006).…”