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Evidence of Market Overreaction to State Antitakeover Legislation

William N. Pugh (Associate Professor of Finance)
John S. Jahera Jr. (Professor of Finance, Department of Finance, Auburn University, Auburn, AL 36849–5245)

Managerial Finance

ISSN: 0307-4358

Article publication date: 1 May 1995



The rise in hostile corporate takeover attempts during the 1980s motivated many states to pass antitakeover legislation, often after lobbying by the management of affected firms. Empirical attempts to assess the impact of such statutes on firm value have yielded mixed results finding either no effect or a significant negative effect. We hypothesize that, while there may be a negative market reaction associated with state antitakeover legislation, the effect is temporary. In empirically examining the effects from the actions of nineteen states, we find that any negative market reactions tend to be followed by roughly equal positive counter‐reactions, suggesting a market overreaction.


Pugh, W.N. and Jahera, J.S. (1995), "Evidence of Market Overreaction to State Antitakeover Legislation", Managerial Finance, Vol. 21 No. 5, pp. 52-66.




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