Corporate governance and employee treatment: Evidence from takeover defenses

This study investigates if antitakeover provisions are a value-enhancing indicator of corporate governance by estimating the effect of takeover susceptibility to labor litigations. Using a unique hand-collected dataset of employee lawsuits, we find a positive relationship between employee litigation and takeover protection. We document that employee lawsuits increase a firm’s susceptibility to a hostile takeover. In addition, we document that higher costs of litigation, measured by fees and case duration, increase the firms’ suitability to takeover. Our results indicate that takeover protections may decrease corporate attention to employees.