Antitakeover Legislation: A Case Study
Not only the state of headquarter is important but the state of incorporation also affects firm’s financial decisions including capital structure. Wald and Long (2006) look at the impact of antitakeover and payout restriction laws on firms’ capital structure decisions. While previous research has found that antitakeover legislation is negatively related with the leverage of affected firms, they find no direct impact on leverage in the long term. But, they find that payout restriction has a significant effect on capital structure. Firms incorporated in states with a stronger payout restriction have lower leverage ratio. “After self-selection is taken into account, firms incorporated in states with more antitakeover provisions have higher