Increase in takeover protection and firm knowledge accumulation strategy

Managerial entrenchment and earnings management

“…In this case we fail to find a significant effect of entrenchment on earnings management practices. This is also in line with our expectations and with the arguments of Kacperczyk (2009) and Wang et al (2016) that, in absence of takeover defenses, managers of Delaware firms are subject to more pronounced pressures from the market for corporate control. Table 5 depicts the results for Equation (2), which tests Hypothesis 3.…”

“…With data from the 1980s until the reforms of the mid-1990s, Daines (2001) and Subramanian (2004) show that the Delaware's mild antitakeover statute facilitated the sale of public firms and encouraged takeovers by imposing shorter delays to hostile bids and by prohibiting extreme managerial defensive tactics against takeovers. Examining the period after the Delaware's legal shift in takeover protection, Kacperczyk (2009) and Wang et al (2016) also find that Delaware-incorporated firms are more profitable than those inscribed elsewhere. In both studies, Delaware law benefited public corporations because takeover defenses allowed managers, who otherwise would be under increased pressure from capital markets, to focus on more long-term decisions with more potential to create shareholder value.…”

“…What scholars, politicians, journalists, investors, and managers are still debating is whether these advantages benefit shareholders or managers (Dyreng et al, 2013). There is a growing consensus among scholars (e.g., Bebchuk and Cohen, 2003;Kacperczyk, 2009;Wang et al, 2016) that, since the second half of the 1990s, several court decisions shifted power from shareholders to managers, as the former relatively friendly-to-takeovers Delaware's regulation was replaced by a legal system in which firms are largely immune to hostile takeovers threats and managers have, therefore, discretion to expropriate shareholders' rents. This new regulatory environment provides, then, an ideal setting to study the benefits and costs of managers' power.…”

Is managerial entrenchment always bad and corporate social responsibility always good? A cross‐national examination of their combined influence on shareholder value

“…First, we show that these governance provisions impose costs to shareholders irrespective of the institutional setting. And second, our study gives response to the call for more research investigating the conditions under which MEPs may interact with other corporate practices to create firm value (Wang et al, ). One of these conditions, as we have shown in this study, is when MEPs are coupled with a strong firm commitment toward its stakeholders in institutional contexts where the attention to stakeholders is voluntary and strategic (LMEs).…”

Long-Term Ownership by Industrial Foundations

“…Scholars, politicians, and executives argue that companies pursue short-run profitability (McKinsey, 2015) at the expense of long-run investments (Sampson and Shi, 2016) and sustainability (Stiglitz, 2016). The perceived trends are blamed on corporate governance related issues like incentive pay (Bolton, Scheinkman, and Xiong, 2006;Bhagat and Bolton, 2014;Ladika and Sautner, 2014), quarterly reports (Kim, Su, and Zhu, 2016), share analysts (Desjardine, 2015), takeover threats (Stein, 1988(Stein, , 1989Asker et al, 2011Asker et al, , 2015Wang, Zhao, and He, 2015), managerial turnover (Kaplan and Minton, 2012), or speculative stock market fluctuations (Cremers, Pareek, and Sautner, 2013). Several remedies have been suggested including loyalty shares (extra voting rights or dividends for long-term shareholders; Johnson, 2015; Solomon 2015), abolishing quarterly reports and earnings guidance (Kay, 2012), bonus caps (the EU Capital Requirements Directive), or limiting hostile takeovers (Milliband, 2012).…”