Firm Size, Antitakeover Charter Amendments, and the Effect of State Antitakeover Legislation

This study investigates the impact of state antitakeover legislation on the market value of affected firms and considers the role that both acquisition attractiveness, as measured by firm size, and antitakeover amendments play in the market reaction. When separating the sample by size and by the presence of amendments, small firms display a negative reaction to the legislation, large firms show no reaction, firms without amendments react negatively, and there is a positive reaction for firms with amendments. When separating the sample on the basis of both dimensions, small firms without amendments, the most attractive acquisition targets, experience a significant, negative market response. Large firms with amendments, the least attractive group, are positively affected. The two intermediate groups are not significantly affected.