Professor Bainbridge...on law, politics, religion, culture & food

Speaking of Dead Hand Pills

Apropos my prior post on the law governing dead hand poison pills, here is a new research paper, Is There Power Behind the Dead Hand? An Empirical Investigation of Dead Hand Poison Pills, by KATHERINE GLEASON, University of New Orleans - Department of Economics and Finance, and MARK KLOCK, George Washington University - Department of Finance:

Dead hand poison pills prevent potential hostile acquirers from circumventing a poison pill with a proxy contest whereby newly elected directors could redeem the pill. Dead hand provisions only permit continuing directors to redeem. Shareholder rights advocates and legal scholars have criticized dead hand poison pills as an assault on shareholder governance, but economic theory suggests potential shareholder benefits. We provide the first empirical study of dead hand poison pills. We find that adoption of dead hand poison pills leads to gains for shareholders and losses for bondholders. This supports Schwert‘s (2000) conjecture that poison pills provide shareholders with better premiums rather than entrench ineffective managers.

Which makes Quickturn doubly pernicious.