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.
Consistent with this assessment, in the recent dispute involving the validity of the pill used by Airgas, none of the briefs gave much consideration to the implications of a ruling invalidating the pill to Delaware's antitakeover statute
. Sec David Marcus, The Strange Case of Section 203, Corp.
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
. It was not until after most states had passed antitakeover statutes
driven by noncompetitive motives that Delaware followed suit.
As observed by Lucian Bebchuk and Alma Cohen, "antitakeover statutes
are possibly important not only in what they actually do but also in what they signal.
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
. Thus, our results may be driven by more dividend payout constraints caused by increased debt covenants after the enactment of antitakeover laws.
111, 134-35 (1987) (finding no direct evidence of a labor/management coalition supporting antitakeover statutes
Capital Structure and Corporate Control: The Effect of Antitakeover Statutes
on Firm Leverage.
Indeed, the market for incorporations has not even penalized the three states that passed severe antitakeover statutes
which have been viewed as detrimental to shareholders.