The Nature of Takeover Resistance : Aggressive Post-Offer Actions to Frustrate Takeover Bids vs. Passive Resistance

We examine the nature of takeover resistance by investigating the determinants of the choice by target managers to take post-offer actions designed to aggressively frustrate the takeover bid, in preference to choosing passive resistance through tactics that just secure a better offer for shareholders. We find that target firm governance and bidder offer characteristics significantly influence the choice in a manner consistent with takeover ‘frustrating actions' being motivated by managerial entrenchment. We also find that, relative to passive resistance, frustrating actions negatively impact stockholder payoffs and increase the likelihood of CEO turnover, irrespective of whether the resisted bid succeeds