Do pills poison operating performance? |
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| Institution: | 1. Zicklin School of Business, Baruch College, One Bernard Baruch Way, New York, NY 10010, USA;2. Adelphi University, 1 South Ave, New York, NY 11530, USA;1. Harvard Law School, Harvard University, 1545 Mass. Ave., Cambridge, MA 02138, United States;2. Fuqua School of Business, Duke University, 100 Fuqua Dr., Durham, NC 27708, United States;3. Columbia Business School, Columbia University, 3022 Broadway, New York, NY 10027, United States;4. INSEAD, Boulevard de Constance, 77305 Fontainebleau Cedex, France;1. Graduate School of Economics, Kyushu University, 744, Motooka, Nishiku, Fukuoka 819-0395, Japan;2. Faculty of Economics, Kyushu University, 744, Motooka, Nishiku, Fukuoka 819-0395, Japan |
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| Abstract: | Contrary to arguments that poison pills degrade firm performance, we find that operating performance modestly improves during the 5-year period after pill adoption. Performance improvements are present in a wide range of firms, and are independent of adoption year and whether the firm is R&D intensive. Although recent arguments suggest that the protection offered by pills is strongest when combined with a staggered board, the performance changes also are unrelated to board structure. This evidence undermines the widely held view that poison pills have systematically negative effects on firm performance. |
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