Poison Pill Redemption: Evidence from the Commercial Banking Industry
Poison pills adopted by commercial banks add another layer of complexity to an already intricate corporate governance mechanism of the banking industry. Using a sample of 164 poison pills adopted by commercial banks between 1984 and 2004, I show that the likelihood of redeeming a pill is a function of the level of capital and the economic conditions prevalent before pill adoptions. Poison pill adopters have similar characteristics with banks of similar size not protected by pills. Moreover, the average structure of the poison pills adopted by commercial banks seems to be less rigid that the structure of the pills adopted by non-financial companies.