Using a hand-collected dataset of largely exogenous legal changes we find that certain takeover laws, such as poison pill and business combination laws, have no discernible impact on hostile activity, while others such as fair price laws have reduced hostile takeovers.

Why is a takeover bad?

The common drawbacks of takeovers include: High cost involved - with the takeover price often proving too high. Problems of valuation (see the price too high, above) Upset customers and suppliers, usually as a result of the disruption involved.

What are takeover laws?

Takeover laws are enacted to regulate takeover activity, and they often take the form of anti- takeover laws intended to thwart hostile takeovers. However, these laws can have the opposite effect of their intended purpose.