Price and probability: decomposing the takeover effects of anti-takeover provisions

We study the effects of anti-takeover provisions (ATPs) on the takeover probability, the takeover premium, and target selection. Voting to remove an ATP increases both the takeover probability and the takeover premium, that is, there is no evidence of a trade-off between premiums and takeover probabilities. We provide causal estimates based on shareholder proposals to remove ATPs and address the endogenous selection of targets through bounding techniques. The positive premium effect in less protected firms is driven by better bidder-target matching and merger synergies.