Which of the Following Statements Regarding Poison Pills Is FALSE

question 39

Multiple Choice

Which of the following statements regarding poison pills is FALSE?

• A)Companies with poison pills are harder to take over,and when they are taken over,the premium that existing shareholders receive for their stock is higher.
• B)Because a poison pill increases the cost of a takeover,all else equal,a target company must be in better shape to justify the expense of waging a takeover battle.
• C)Poison pills also increase the bargaining power of the target firm when negotiating with the acquirer because poison pills make it difficult to complete the takeover without the cooperation of the target board.
• D)By adopting a poison pill,a company effectively entrenches its management by making it much more difficult for shareholders to replace bad managers,thereby potentially destroying value.

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Definitions:

SS(Total)

The total sum of squares in a statistical analysis, representing the total variation in the dataset.

ANOVA Table

A tabulated format that displays the output from an analysis of variance, summarizing the sources of variation and the associated statistical tests.

α

Represents the level of significance in hypothesis testing, often denoting the probability of making a type I error.

SSB

A statistical term that can stand for Sum of Squares Between groups, measuring the variability among group means in an analysis of variance.