To assess the impact of an antitakeover statute
(ATS), one must
78) Like the antitakeover statute
at issue in CTS, the Minnesota law creates nonuniformity, but not an inconsistent burden.
For example, promoters might be attracted to California, which has no antitakeover statute
and has not yet validated an important type of poison pill.
This is so because it is a well-known fact of modern American business that Delaware offers quick and inexpensive incorporation, a low corporate tax burden, and flexibility in key corporate structural issues, including staggered terms for directors, limitations on appraisal rights, and an antitakeover statute
that promotes fair and efficient negotiation of mergers, to name a few.
Using this rationale, both studies conclude that firms that become subject to an antitakeover statute
(posited to reflect a reduction in the takeover threat) experience an increase in managerial slack, a conclusion that is consistent with the hypothesis that takeover threats keep managers on their toes.
Race-to-the-bottom theorists point to Maryland's Unsolicited Takeover Act of 1999--by far the most potent antitakeover statute
that has appeared to date--as the latest and most extreme manifestation of their view.
This analysis is consistent with the history of Delaware's antitakeover statute
TABLE 1: PROBABILITY OF BECOMING A HEDGE FUND TARGET AND STATE ANTITAKEOVER STATUTES This table presents the marginal effects estimates from logit regressions of the ex-ante probability of becoming a hedge fund target next year on different state antitakeover statutes
and firm- level controls as of the end of this year.
Qi and Wald (2008) determine that debt holders use more debt covenants to minimize agency costs when borrowers are incorporated in states with stronger antitakeover statutes
Capital Structure and Corporate Control: The Effect of Antitakeover Statutes
on Firm Leverage.