Do firm and state antitakeover provisions affect how well CEOs earn their pay?

The relationship between CEO pay-adjusted firm performance and firm-specific antitakeover amendments and state antitakeover laws is examined. The findings suggest that the potential entrenchment resulting from the reduced threat of external control provided by antitakeover provisions may allow the CEO to deliver a lower level of firm performance relative to their compensation. At first glance, the state antitakeover provisions appear to be insignificant in the presence of firm-specific amendments. However, further analysis reveals they can play an important role, in some cases reinforcing the effects of the firm-specific amendments. With respect to the firm-specific amendments, the negative relation is associated with the presence of blank check preferred stock and poison pill amendments. Copyright © 2000 John Wiley & Sons, Ltd.