Hostile Takeovers and Director careers: The Consequences of Implementing Poison Pills

Abstract

This thesis investigates the career consequences for board directors who sit on a board that implements a poison pill defense strategy. Using datasets of directors and companies from 2010-2024, our study runs regression analyses to evaluate whether the adoption of poison pills affects the likelihood for directors of being appointed new board positions. The results of our study show a significant negative relationship between poison pill adoptions and likelihood of obtaining new directorships. These findings could mean that the market penalizes directors for managerial entrenchment strategies perceived to harm shareholder value. Our study closely aligns with previous research, strengthening the thesis that directors face career repercussions by implementing a poison pill. Even though this paper faced limitations such as omitted variable bias and potentially misidentification of the first poison pill adaptation our research adds to the discussion of the deterrent effect of career consequences on the adaptation of entrenchment mechanisms. We encourage future researchers to explore additional measures of career impacts and the use of more comprehensive datasets to get a deeper understanding of this dynamic.