NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Why Firms Adopt Antitakeover Arrangements

Lucian Arye Bebchuk

NBER Working Paper No. 10190
Issued in December 2003
NBER Program(s):   CF   LE

Firms going public have increasingly been incorporating antitakeover provisions in their IPO charters, while shareholders of existing companies have increasingly been voting in opposition to such charter provisions. This paper identifies possible explanations for this empirical pattern. Specifically, I analyze explanations based on (1) the role of antitakeover arrangements in encouraging founders to break up their initial control blocks, (2) efficient private benefits of control, (3) agency problems among pre-IPO shareholders, (4) agency problems between pre-IPO shareholders and their IPO lawyers, (5) asymmetric information between founders and public investors about the firm's future growth prospects, and (6) bounded attention and imperfect pricing at the IPO stage.

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Published: Bebchuk, Lucian A. “Why Firms Adopt Antitakeover Arrangements." University of Pennsylvania Law Review 152 (2003): 713-753.

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