Do Takeover Defenses Impair Equity Investors’ Perception of ‘Higher Quality’ Earnings?

摘要: Prior studies show that managerial entrenchment deteriorates the credibility of earnings, hence reducing value relevance earnings. However, prior literature documents likelihood earnings management is lower in firms with more antitakeover provisions since entrenched managers pursue a ‘quiet life’ instead striving to maximize wealth shareholders. Despite ‘higher quality’ such firms, we find takeover protection impairs perception equity investors on quality. We attribute this contradictory result failure take risky but value-enhancing projects owing pursuits quiet life. also expect and investments defensive are valued at discount, suggesting less advantage their growth potentials. corroborate by showing variability firm firms.