Shareholder Wealth Effects of the 1986 Ohio Antitakeover Law Revisited: Its Real Effects

Abstract

In an earlier published paper (Ryngaert and Netter), we argue that the November 1986 Ohio antitakeover legislation provided a unique opportunity to test competing hypotheses about the shareholder wealth effects of antitakeover legislation. 1 The Ohio law provided an excellent setting for this test since the bill's introduction was a surprise to the market and its passage was accomplished in a short period of time.2 We found that the Ohio firms that would be expected to be most affected by the legislation suffered significant stock price declines in the period when news about the legislation became public. Our paper has been criticized by Margotta, McWilliams, and McWilliams (hereafter MMM), who conclude that their analysis of the stock price reaction to the 1986 Ohio legislation finds no significant shareholder wealth effects. In this paper, we argue that our original results concerning the shareholder wealth effects of the Ohio legislation are correct and that the MMM results, if anything, support our original conclusions.

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