Corporate Financial Performance and the Use of Takeover Defenses

This paper tests the hypothesis that the threat of a contested <p> takeover improves corporate performance. This is done by a cross-sectional <p> analysis of listed Danish firms with and without effective takeover defenses. <p> Takeover defenses adopted by Danish firms mainly consist of dual class <p> voting rights often in combination with foundation ownership. Using <p> simultaneous equation estimation to deal with the problem of causation, the <p> results show that unprotected firms do not outperform protected firms. This <p> suggests that management in unprotected firms are disciplined by other <p> corporate governance mechanisms than the market for corporate control, <p> including the legal protection of shareholders.