Managerial Entrenchment and Anti-takeover Provisions in Japan

Author Name HOSONO Kaoru  (Gakushuin University) /TAKIZAWA Miho  (Toyo University) /TSURU Kotaro  (Senior Fellow, RIETI)
Creation Date/NO. April 2010 10-E-022
Research Project Economic Analysis of Organizations and Institutions: The design of organizations and institutions to enhance corporate performance and growth
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In recent years, there has been an increase in the number of firms introducing anti-takeover provisions in Japan as well. In this paper, we analyze the characteristics of Japanese firms that introduced anti-takeover provisions during the four year period from fiscal 2005 to fiscal 2008, following the release of the official guidelines for anti-takeover provisions in 2005. Our main results are the following. First, firms' operating performance or stock market valuations were not related to the adoption of takeover defense measures. Second, firms' age and their ownership structure were correlated with the adoption of antitakeover provisions. Specifically, companies that were older, had lower proportions of shares held by their directors, or higher cross-shareholding ratios were more likely to adopt takeover defense measures, which suggests that the adoption of such measures is motivated by self-protection on the part of corporate managers and influenced by the conflicts of interest between managers and shareholders. In addition, as controlling shareholders had lower shares of stocks and institutional investors had higher shares of stocks, firms were more inclined to adopt takeover defense measures, suggesting that companies are likely to adopt such measures if their shares are liquid and easy to acquire.

Published: Kaoru Hosono, Miho Takizawa and Kotaro Tsuru, 2011. "Managerial Entrenchment and Antitakeover Provisions in Japan," Seoul Journal of Economics, Vol. 24(3), pp. 287-331.