Poison pills and corporate governance: a study in the brazilian stock market

Abstract

We investigate whether there is an association between the adoption of poison pills and premium corporate governance listing segments in the Brazilian stock market. Our sample consists of 217 non-financial publicly-traded companies listed on Brasil, Bolsa, Balcão (B3) with data available for the period 2010-2017. Through logit and probit regressions, we find that the adoption of poison pills is positively associated with listings in the New Market and Level 2 corporate governance segments. Thus, the adoption of this anti-takeover device by companies that are listed at the highest levels of corporate governance can be useful to current and potential investors since, given the rise of public companies with predominantly dispersed capital in the Brazilian stock market, hostile takeover attempts have been increasingly recurrent. Further, our results contribute theoretically towards a possible convergence between Signaling Theory and the adoption of poison pills, shedding light on the fact that the adoption of this anti-takeover device as a complementary corporate governance mechanism may represent a protection signal issued by companies to the market designed to attract new investors.