Takeover Defenses of IPO Firms
Laura Casares Field, Penn State University
Jonathan M. Karpoff, University of Washington and Emory University

Many firms deploy takeover defenses when they go public. IPO managers tend to deploy defenses when their compensation is high, shareholdings are small, and oversight from non-managerial shareholders is weak. The presence of a defense is negatively related to subsequent acquisition likelihood, yet has no impact on takeover premiums for firms that are acquired. These results do not support arguments that takeover defenses facilitate the eventual sale of IPO firms at high takeover premiums. Rather, they suggest that managers shift the cost of takeover protection onto non-managerial shareholders. Thus, agency problems are important even for firms at the IPO stage. (Accepted Spring 2002.)