| Abstract: | This study uses the introduction of second-generation antitakeoverlegislation as a natural experimental setting to infer the valuethat managers place on the control rights conferred by stockownership. We conjecture that managers will reduce their stockholdingsin the post-legislation period because they can ensure theirprior level of control while holding fewer risky shares. Usinga variety of specifications, we find robust evidence consistentwith this "revealed preference" hypothesis. Further demonstratingthe key role played by control considerations in managers' stockholdingdecisions, the reductions in ownership are concentrated in managementteams with higher levels of initial ownership and in firms withoutpoison pills. |
