takeover and,hence,their marketprices.Theneteffect on
valuewillvaryacrossfirms, however;firmswiththemost
inefficientmanagementaremostlikelytoexperienceadrop
in valueon thepassage of theseamendments,whilefirms
withmoreefficientmanagementarenotlikelytoshowany
noticeable change in value.
There is a surprising lack of consensus on the effects of
antitakeover amendments on stock prices. Linn and
McConnell (1983) studied the effects of anti-takeover
amendments on the stock price and found positive but
insignificant reactions to antitakeover amendments.
13 DeAngelo and Rice (1983) investigated the same
phenomenon and found a negative, albeit insignificant, effect.
14 Dann and DeAngelo (1983) examined standstill
agreements
15 and negotiated premium buy-backs
16 and reportednegativestockpricereactions around their
announcements, a finding consistent with the loss of
shareholder wealth.
17 Dann and DeAngelo (1988) extended their study to
antitakeovermeasurespassednot inresponseto atakeover
attempt, butin advanceof a takeover as a defensive measure.
18 Theyreportedastockpricedeclineof2.33percentaround
theannouncementofthesemeasures.CommentandSchwert
(1995) updated these studies and provided one possible
explanation for themixed conclusionsof previous studies.
They concluded that antitakeover amendments provide
relatively little protection against hostile acquisitions and
oftenincreasepremiumspaidtotargetcompanystockholders
in acquisitions.
19