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Discipline or disruption?: stakeholder relationships and the effect of takeover threat

Research output: Contribution to journalJournal article

Published
<mark>Journal publication date</mark>10/2016
<mark>Journal</mark>Management Science
Issue number10
Volume62
Number of pages22
Pages (from-to)2820-2841
<mark>State</mark>Published
Early online date7/12/15
<mark>Original language</mark>English

Abstract

While a sizable literature suggests that firms benefit from vulnerability to takeovers because it reduces agency problems, the threat of takeovers can also impose ex ante costs on firms by adversely affecting relationships with important stakeholders, such as major customers. We find that when firms have
corporate customers as important stakeholders, an exogenous reduction in the threat of takeovers increases their ability to attract new customers and strengthens their relationships with existing customers, resulting in improvement in operating performance. The positive effect on operating performance is greater for suppliers that are likely to offer unique and durable products to their customers. Our results suggest a beneficial aspect of protection from takeovers when stakeholder relationships are important.