Positive or negative? : the impact of anti-takeover legislation on R&D investment

Abstract

Anti-takeover laws are laws designed to protect target companies from hostile activity by making the bidder's attempt of acquisition more expensive and/or time consuming, as there are three different types anti-takeover laws. The aim of this dissertation is analyzing the impact of different kind of antitakeover laws (fair price laws, control share acquisition laws, and business combination laws) on firm R&D expenditures. In order to do so, this study uses data about U.S. public firms between 1970 and 2011. The empirical findings indicate that fair Price laws increase R&D activities because of the possibility of increasing the expected takeover premium for managers, whereas control share acquisition laws and business combination laws decrease it by reducing the external pressure, which is the biggest incentive for firm managers to remain competitive in the market. Alongside, Business Combination laws seem not to have a significant impact on firm's R&D expenditures.