Who Opts Out of State Antitakeover Protection? The Case of Pennsylvania's Sb 1310

In 1990, Pennsylvania enacted Senate Bill 1310 which contains five provisions designed to make takeovers prohibitively expensive. Firms were permitted, however, to Opt out of some or all of the law's provisions. We examine the relation between the opt-out decision and attributes of corporate governance for a comprehensive sample of firms that were incorporated in pennsylvania prior. We find that firms electing to opt out of the law are likely to be larger, have lower insider control of voting rights, are less likely to have a poison pill, and spend half as much on research and development as firms that do not opt out. These findings still hold when we control for firm size and the monitoring activities of block holders and outside directors. We also examine the impact of the california public employee retirement system (calpers) on the opt-out decision. Calpers tried, but was unable to significantly affect the opt out decision